Subject: Comments to Proposed NASD Rule

August 6, 2007

Nancy M. Morris, Secretary
U.S. Securities and Exchange Commission
100 F Street NE
Washington, D.C. 20549-9303

RE: SR-NASD-2007-021: Proposed Amendment to Rule 12100(u) of NASD Code

Dear Ms. Morris:

I have represented investors in arbitration for nearly 15 years. Throughout that period, I have been concerned with the presence of conflicted public arbitrators in the NASD arbitration pool. In fact, one of the major flaws in the NASD arbitration system is the perception, if not also the reality, that the NASD condones the empanelling of conflicted public arbitrators The problem is exacerbated because NASD rules require that an industry arbitrator serve on every three person arbitration panel. The possibility of having two or even three arbitrators with a pro industry bias effectively destroys the prospect of getting a fair hearing. Thus, as an initial matter, I strongly oppose the requirement of an industry arbitrator in investor cases.

While the NASD proposed amendment to Rule 12100(u) is a step in the right direction, even that proposal falls short of resolving the conflicted public arbitrator problem. In particular, the NASD proposal to amend Rule 12100(u) will disqualify as public arbitrators professionals who, for the last two years, receive industry fees in excess of $50,000 annually from matters involving investor accounts or transactions. One who receives substantial fees from the securities industry, however, also should not be able to serve as a public arbitrator, regardless of the nature of the industry work performed. It is the receipt of fees from the securities industry that creates the conflict and the appearance of bias.

Accordingly, in the interest of investor protection, the NASD proposal should be revised to apply the disqualification regardless of the nature of the industry engagement.

Janet K. DeCosta