Subject: File No. SR-NASD-2005-094
From: Steven J Gard, Esq.
Affiliation: Partner, Gard Smiley Bishop & Dovin LLP

September 20, 2005

I write to comment on Proposed NASD Rule 10308 as well as NYSE Proposed Rule 607 SEC File Number SR-NYSE-2005-43 which seek to redefine the term public arbitrator. Under both proposed Rules, a public arbitrator could be an individual whose firm derives up to 10 of its gross revenues from the securities industry.
In all SRO arbitrations there is already one industry arbitrator appointed under the rules. This frankly contributes to the public perception of SRO arbitration against securities industry member firms as a stacked deck or a rigged jury. Moreover, in some arbitrations, this perception is correct as the industry arbitrator is an individual who has personally engaged in some of the same misconduct as that complained of or whose firm has engaged in the same misconduct.
Under the proposed NASD and NYSE Rules, the other two arbitrators could easily be lawyers or accountants whose firms derive substantial revenues from brokerage firms. These days large law firms and accounting firms have gross revenues well in excess of 100 million. Under the proposed SRO rules, arbitrators whose firms derive tens of millions of dollars from brokerage firms could be classified as public arbitrators. Moreover, that situation currently exists under existing SRO Rules. It is little wonder that the public perceives industry arbitration as a stacked deck. In many cases it is.
If the current system of arbitration administered by the SROs is to continue instead of turning over the administration of securities industry arbitrations to a truly neutral party such as the AAA or the SEC, even the appearance of bias or conflict of interest should be scrupulously avoided. The proposed NASD and NYSE rule revisions are a step in the right direction but do not go nearly far enough to eliminate the appearance or potential of bias and self-interest. As long as the current system exists of appointing an industry arbitrator to every arbitration panel while at the same time allowing other arbitrators with ties to the securities industry to serve as public arbitrators, the SEC and the SROs will continue to have to defend the system of industry arbitration to Congress, the public, and critics who accuse the system of bias and self-interest.

Very Truly Yours,
Steven J. Gard
Gard Smiley Bishop & Dovin LLP
7000 Peachtree Dunwoody Road, N.E.
Building Two
Atlanta, Georgia 30328