Arbitration: Rule G-35

On December 1, 1997, the Securities and Exchange Commission (SEC) approved amendments to rule G-35, the Board's Arbitration Code, that create two new sections.⁽¹⁾ Section 37 states that the Board will not accept any new arbitration claims filed on or after January 1, 1998. Thus, the Board has terminated its arbitration program as of that date.⁽²⁾ Because municipal securities customers need an arbitration forum for the resolution of disputes involving the municipal securities activities of bank dealers, new Section 38 provides that, as of January 1, 1998, every bank dealer (as defined in rule D-8) shall be subject to the Code of Arbitration Procedure of the NASD for every claim, dispute or controversy arising out of or in connection with the municipal securities activities of the bank dealer acting in its capacity as such.

Finally, in response to a comment received by the SEC concerning the amendments, the Board has made publicly available the names of arbitrators for all customer awards rendered after May 10, 1989. This information will facilitate the NASD's administration of those arbitration claims received after January 1, 1998 involving the municipal securities activities of brokers, dealers and municipal securities dealers where an arbitrator appointed to such a case previously served as an arbitrator in the Board's program but has never served as an arbitrator in the NASD's program.

December 1, 1997

TEXT OF AMENDMENTS⁽³⁾

Rule G-35. Arbitration

Every broker, dealer and municipal securities dealer shall be subject to the Arbitration Code set forth herein.

Arbitration Code

Sections 1 through 30. No change.

Section 31. Awards

(a) - (g) No change.

(h) Awards involving public customers shall be made available for public inspection at the Board's offices except for: (1) the names of the parties who are public customers unless the customer agrees to the disclosure of his identity; and (2) the names of the arbitrators. If a party to an arbitration involving a public customer wishes to review prior awards rendered by the arbitrators assigned to the party's current case, such awards will be made available to the party if the party requests such awards within three business days of notification of the names of the arbitrators.

Sections 32 - 36. No change.

Section 37. Arbitration Claims Filed On or After January 1, 1998. The Board will not accept any new arbitration claims filed on or after January 1, 1998.

Section 38. Arbitration Involving Bank Dealers. As of January 1, 1998, every bank dealer (as defined in rule D-8) shall be subject to the Code of Arbitration Procedure of the National Association of Securities Dealers, Inc. ("NASD") for every claim, dispute or controversy arising out of or in connection with the municipal securities activities of the bank dealer acting in its capacity as such. For purposes of this rule, each bank dealer shall be subject to, and shall abide by, the NASD's Code of Arbitration Procedure as if the bank dealer were a "member" of the NASD.

ENDNOTES

1. See Securities Exchange Act Release No. 39378 (Dec. 1, 1997).

2. The Board, however, will continue to operate its program in order to administer its current, open cases (i.e., cases received prior to January 1, 1998).

3. Underlining indicates additions; strikethrough denotes deletions.

Copyright 2000 Municipal Securities Rulemaking Board. All Rights Reserved. Terms and Conditions of Use