Subject: File No. SR-NASD-2005-094
From: Steve Parker
Affiliation: Attorney

September 20, 2005

Dear Mr. Katz:

The proposed rule change does not go far enough. Simply stated, the requirement of an industry arbitrator is already an anachronism and should be eliminated altogether.

The rationale usually advanced for having an industry arbitrator is that he or she brings industry experience to bear in deliberations. Investing, however, is not alchemy. Even its more complicated principles are easily understood by those who have trained to be public arbitrators, and are even presumably understandable by mere investors. See NASD Rule 2310.

Whatever the ostensible rationale for industry arbitrators, they are predisposed to bring significant anti-claimant or pro-industry prejudices into the hearing room due to the institutional interests of their employers.

As a former state securities regulator, I witnessed first hand the public outcry over analyst conflicts of interest that led to the reforms embodied in NASD Rule 472b and elsewhere. Over the past decade, other fundamental changes to our securities regulatory systems have empowered the individual to make sound, fully informed decisions unfiltered by those with conflicting self-interests. See, e.g., Regulation FD.

Unfortunately, the principles underlying these reforms have not yet penetrated the deepest roots of anti-investor or pro-industry biases written into our regulatory structures. It is time for the Commission to eliminate the industry arbitrator requirement.


Steve Parker, Attorney, Page Perry, LLC
Former Director, Georgia Securities Divsion
Former Member, Enforcement Section, North American Securities Administrators Association
Member, Public Investors Arbitration Bar Association