Subject: File No. SR-NASD-2005-094
From: Jeffrey D. Pederson
Affiliation: Attorney

September 20, 2005

I am an attorney who has been involved in more than 80 NASD/NYSE customer arbitration cases. In arbitration, the panel members are the ultimate triers of fact - Even more so than a jury in a state civil case. This is because the ability to overturn the factual findings of an arbitration panel on appeal is more difficult than overturning on appeal the factual findings of a jury. This being the case, objectivity of panel members is crucial. Any trial lawyer worth his/her salt will tell you that objectivity of the finder of fact - whether an arbitration panel or a jury - means having individuals with as little knowledge of the subject matter of the case as possible. In NASD arbitration, you already have one of the three panel members employed in the securities industry. This person comes in with more knowledge than you would ever want a juror to have. This person constitutes one-third of the finders of fact on an NASD arbitration panel. This is the same as having 4 biased - or at least overeducated - jurors on a jury of 12. Notwithstanding the fact that such invididuals would never withstand a challenge for cause in a jury setting, the existence of the industry arbitrator on a panel makes it all the more crucial that the two remaining public arbitrators come in to the case as untarnished as possible. The only way to do this is to have public arbitrators with as little connection to the securities industry as possible.