Finance 500, Inc.
19762 Mac Arthur Blvd. - Suite 200
Irvine, California 92612
May 19, 2003
Securities & Exchange Commission
450 Fifth Street, NW
Washington, DC 20549
Re: Expungement of CRD Records
Dear Sir or Madam:
Our firm is an independent broker/dealer member of the NASD. We are writing to comment regarding the proposed Rule 2130 (File No. SR-NASD-2002-168) concerning expungement of claims from the Central Registration Depository ("CRD") system. We strongly believe that this new proposed rule is inadvisable, damages the integrity of the investment industry and will inhibit both capital formation and liquidity for many reasons, including the following:
- The proposed rule would make the NASD the adversary of member firms and their registered representatives in all cases where a panel of arbitrators has recommended the expungement of a claim.
- The proposed rule undermines both the authority of NASD arbitrators, and the integrity of the awards rendered in NASD arbitrations. For decades, the NASD and its members have sought to encourage the public's confidence in the integrity of the arbitration process, and the awards rendered in those arbitrations.
- The proposed rule presumes that NASD arbitrators after hearing both sides of a matter are somehow not qualified to reach a reasoned decision regarding expungement of a claim from the CRD. We believe this is inimical to the authority and integrity of the arbitrators, the arbitration process, and the awards rendered in those arbitrations.
- The proposed rule undermines the neutrality of the NASD Dispute Resolution by creating a systematic prejudice against the respondent no matter what the outcome of the proceeding, even if the respondent is exonerated.
- The proposed rule would result in a multiplicity of actions, unnecessary expense, and the likelihood of inconsistent findings and results. If the NASD opposes any petition filed in state court to confirm an arbitration award which includes a finding that the claim should be expunged, it will be necessary for a new hearing to be held in each of those cases in the state court, where the same issues will be litigated, and the same witnesses will probably need to be called, as in the underlying NASD arbitration. It is not inconceivable that the state court could reach entirely different conclusions and findings in that second hearing, than those which the arbitrators reached in the underlying arbitration. Again, this is not only unnecessarily wasteful and expensive, but raises the possibility of inconsistent results, which would further undermine the integrity of NASD arbitrations, and would erode public confidence in the awards rendered by NASD arbitrators.
We believe that NASD arbitrators who hear the claims and response in full are no less qualified to reach a valid conclusion regarding the expungement of a claim from a registered person's record, than they are to resolve the merits of underlying disputes which are presented to them for arbitration. The Securities & Exchange Commission, the NASD and its members, as well as their associated persons, have a common interest in promoting public confidence in NASD arbitrations, NASD arbitrators, and the awards rendered in NASD arbitration proceedings. For all of the reasons set forth above, we believe that the proposed rule will do just the opposite, and will undermine the public's confidence in this process. We strongly urge that this proposed rule not be adopted.
Finance 500, Inc.
By: Robert L. Hicks________
Robert L. Hicks, president