Inclusion of Non-SRO Arbitration Forum as an Alternative Forum in Predispute Arbitration Agreements.

*These are suggested departments only. Others may be appropriate for your firm.

EXECUTIVE SUMMARY

The NASD Board of Governors has approved a resolution recommending that members consider including a non-SRO arbitration forum in predispute arbitration agreements with customers.

BACKGROUND

In a letter dated May 10, 1990, Richard G. Ketchum, Director of the Division of Market Regulation of the Securities and Exchange Commission (SEC), requested that the NASD, as well as other securities industry self-regulatory organizations (SROs), consider whether the industry's SROs should amend their rules to require broker-dealers' predispute arbitration contracts with investors to include arbitration fora in addition to those administered by the securities industry.

At the recommendation of the NASD National Arbitration Committee and in response to the SEC's request, the NASD Board of Governors approved a resolution at its September 1990 meeting recommending that members consider including a non-SRO arbitration forum in predispute arbitration agreements with customers. Consistent with its view that SRO rules should not mandate contractual terms between members and their customers, the Board's recommendation in this regard is not mandatory. But it is intended to alert members to the existence and availability of non-SRO arbitration fora which, although not subject to oversight by the SEC, are available for the resolution of controversies arising in the securities industry.

Questions concerning this notice may be directed to Norman Sue, Jr., Office of General Counsel, at (202) 728-8117.