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NFA amends arbitration rules, expands mediation program

At its November 2000 meeting, NFA's Board of Directors approved several changes to NFA's Code of Arbitration to improve the program's overall efficiency. The Board also approved comparable changes to the rules governing Member-to-Member disputes. The rule changes are currently being reviewed by the Commodity Futures Trading Commission.

"All of these rule changes are a result of feedback we have received from NFA Members and other interested parties," says Cindy Cain, director of Arbitration. "We believe they will strengthen NFA's efforts to keep its dispute resolution services efficient, expeditious and affordable."

The changes include raising the dollar limits for cases that are decided through summary proceedings and heard by three-arbitrator panels, making NFA's in-house mediation program available to parties before a demand for arbitration is filed and providing for the electronic filing of certain types of documents.

Summary proceedings, where one arbitrator decides the case based on the parties' written submissions, comprise a majority of NFA's caseload. Almost 50 percent of customer cases and 60 percent of Member cases filed at NFA since January 1995 involved summary proceedings.

To allow more cases to be decided through summary proceedings and to be consistent with the arbitration rules at the National Association of Securities Dealers (NASD) and other forums, the new rules will raise the dollar limit for summary proceedings to $25,000 for customer cases and to $50,000 for Member cases.

"Raising the limit for summary proceedings benefits NFA and the parties," says Cain. "Summary proceedings are easier for NFA to administer and they move through the arbitration process more quickly, saving time and money."

The new rules will also raise the dollar amount for claims that are decided by a three-arbitrator panel. NFA will conduct three-arbitrator oral hearings for customer cases over $50,000 and for Member cases over $100,000.

Customer cases between $25,000 and $50,000 and Member cases between $50,000 and $100,000 will be heard by one arbitrator. Parties in these cases may request a full, three-arbitrator panel; however, they will be required to pay a higher hearing fee. The single arbitrator may also request a full panel if he believes the circumstances warrant it.

Another significant change to NFA's dispute resolution program regards an expansion of its in-house mediation service. In the past, NFA's mediation program was available once an arbitration Demand was filed. However, other forums such as the NASD and the American Arbitration Association also offer a separate mediation program.

"We decided to begin offering a new pre-arbitration mediation option because we wanted to give customers and Members additional opportunities to settle their disputes," says Cain. "However, we will only accept mediation cases that fall within NFA's arbitration jurisdiction."

Pre-arbitration mediation cases will be referred to NFA's in-house mediators. These individuals, members of NFA's Legal Department, are trained and experienced mediators. NFA will charge a $450 fee for its new mediation service, consisting of a minimal administrative fee and mediator session fees of up to four hours. NFA will charge an hourly fee of $100 for the mediator's service beyond four hours.

"We have prepared a brochure outlining the new mediation program," says Cain. "The brochure and other information about the program are also available on our web site (www.nfa.futures.org)."

The third major change to NFA's arbitration rules concerns the electronic filing of certain case documents. After initial pleadings are filed in a case, NFA will accept and serve filings (e.g., letters and motions) by electronic mail or facsimile.

"NFA currently permits respondents in BCC cases to file pleadings electronically," says Cain. "Accepting arbitration documents electronically is a continuation of the trend to take advantage of new communication technologies."

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