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PROPOSED AMENDMENTS TO NFA'S ARBITRATION RULES
(Additions are underscored and deletions are bracketed)

MEMBER ARBITRATION RULES

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SECTION 3. ARBITRATION PANEL

(a) Appointment of Panel.

All arbitration proceedings under these Rules shall be conducted before an arbitration panel consisting of three NFA Members or individuals connected therewith (one such Member or individual designated as Panel Chairman) appointed by the Secretary [President], except that where the aggregate amount of the claims (exclusive of interest and costs) do not exceed $20,000, the Panel shall consist of one such person unless the Secretary directs otherwise.

(b) Disclosures Required.

Prior to being appointed to the Panel, each arbitrator under consideration shall disclose to NFA [the President] any circumstances that might prevent the arbitrator from acting impartially.

(c) Appointment of Panel; Disclosure and Challenge.

The Secretary [President] shall thereupon appoint, pursuant to Section 3(a), an arbitration Panel to resolve the dispute. No arbitrator shall have acted as the mediator in the same dispute. NFA [The Secretary] shall promptly notify the parties of the names, business affiliations and other relevant information. Any objection of a party to such appointment shall be specific and for cause and submitted to NFA [the President] in written form. Each party or their representative shall disclose to NFA [the President] any circumstances likely to affect an arbitrator's impartiality, including any bias or any financial interest in the result of the arbitration or any past or present relationship with the arbitrator. Any party who fails to disclose such information shall be deemed to have waived any objection to that arbitrator based on such information. Each arbitrator appointed shall disclose to NFA [the President] any circumstances likely to affect impartiality, including any bias or any financial interest in the result of the arbitration or any past or present relationship with the parties or their representative. Upon receipt of such information from an arbitrator or other source, NFA [the President] shall communicate such information to the parties, and if NFA [the President] deems it appropriate to do so, to the Panel and others. Thereafter, NFA [the President] shall determine whether the arbitrator should be disqualified and shall inform the parties of the decision, which shall be conclusive.

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(e) Replacement.

If an arbitrator becomes ineligible or otherwise unable to serve on the Panel, the Secretary [President] shall (unless the parties request otherwise) appoint a replacement to the Panel. In the event an arbitrator is excused or recuses himself after the commencement of the hearing because a party failed to disclose information which may be grounds for objecting to the arbitrator, the party withholding the information shall be deemed to have waived his right to object to proceeding with the remaining two arbitrators. If a replacement is appointed after the commencement of the hearing, the Panel shall determine whether all or any part of any prior hearing sessions shall be repeated.

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SECTION 4. TIME PERIOD FOR ARBITRATION

No Demand for Arbitration may be arbitrated under these Rules unless a Demand or notice of intent to arbitrate (See Sections 5(a) and (c) below) is received by NFA [the Secretary] within two years from the date when the party filing the Demand for Arbitration knew or should have known of the act or transaction that is the subject of the controversy. No counterclaim, cross-claim or third-party claim may be arbitrated under these Rules unless it is received by NFA [the Secretary] within two years from the date when the party asserting the counterclaim, cross-claim or third-party claim knew or should have known of the act or transaction that is the subject of the counterclaim, cross-claim or third-party claim or it is served on NFA [the Secretary] within 45 days from the date of service of the Demand for Arbitration on the Respondent by NFA [the Secretary], whichever is later. NFA [The Secretary] shall reject any claim that is not timely filed. If, in the course of any arbitration, the Panel determines that the requirements of this section have not been met as to a particular claim, the Panel shall thereupon terminate the arbitration of the claim without decision or award.

SECTION 5. INITIATION OF ARBITRATION

An arbitration proceeding under these Rules shall be initiated as follows:

(a) Notice of Intent to Arbitrate.

If the two-year time limit under Section 4 of these Rules is close to expiring, a person wanting to file a Demand for Arbitration may notify NFA [the Secretary], either in writing or orally, of such person's intent to arbitrate. NFA [The Secretary] shall maintain a record of the receipt of each such notice and shall promptly provide such person with a copy of these Rules and a Demand for Arbitration form.

(b) Demand for Arbitration Pursuant to a Notice of Intent to Arbitrate.

If a person who files a notice of intent to arbitrate decides to proceed with NFA arbitration, such person shall, within 35 days after the date NFA provided the person with a copy of the Rules and a Demand for Arbitration form under Section 5(a) above, serve a completed Demand for Arbitration on NFA [the Secretary].

(c) Demand for Arbitration.

NFA [The Secretary] shall promptly review each Demand for Arbitration for completeness. Any Demand for Arbitration which NFA [the Secretary] deems to be incomplete, or which is not accompanied by the appropriate fee, shall be returned by certified mail. In that event, such person shall serve a completed Demand for Arbitration, together with any unpaid fee, within 20 days following transmittal by NFA [the Secretary]. NFA [The Secretary] shall reject any Demand for Arbitration which has not been timely filed, or for which the appropriate fee has not been paid.

(d) Notice to Respondent.

NFA [The Secretary] shall promptly serve a copy of the completed Demand for Arbitration on each person named therein as a Respondent.

(e) Answer to a Demand for Arbitration

The Respondent shall serve an Answer on NFA [the Secretary] within 45 days from the date of service of the Demand for Arbitration on the Respondent by NFA [the Secretary]. The Respondent shall concurrently serve a copy of the Answer on the Claimant. An allegation in the Demand for Arbitration that is not denied in the Answer shall be deemed by the Panel to be admitted.

(f) Counterclaim and Cross-claim.

If any counterclaim or cross-claim is asserted, the party asserting the counterclaim or cross-claim shall promptly remit the appropriate fee to NFA [the Secretary] (See Section 11 below). Any counterclaim or cross-claim which NFA [the Secretary] deems to be incomplete, or which is not accompanied by the appropriate fee, shall be returned by certified mail. In that event, such person shall serve a completed counterclaim or cross-claim, together with any unpaid fee, within 20 days following service by NFA [the Secretary]. NFA [The Secretary] shall reject any counterclaim or cross-claim which has not been timely filed, or for which the appropriate fee has not been paid.

(g) Reply to Counterclaim or Cross-claim.

The person against whom the counterclaim or cross-claim is asserted shall reply to the counterclaim or cross-claim by serving a Reply on NFA [the Secretary] within 35 days after the date of service of the counterclaim or cross-claim by NFA [the Secretary], and concurrently shall serve a copy of the Reply on the counterclaiming or cross-claiming Respondent. Any allegation in the counterclaim or cross-claim that is not denied in the Reply shall be deemed by the Panel to be admitted.

(h) Third-party Claim.

A Respondent may file a third-party claim against a Member or Associate under these Rules. If the third party is not a Member or Associate, such person must agree or have agreed to submit to arbitration. If any third-party claim is asserted, the Respondent asserting the third-party claim shall promptly remit the appropriate fee to NFA [the Secretary] (See Section 11 below). Any third-party claim which NFA [the Secretary] deems to be incomplete, or which is not accompanied by the appropriate fee, shall be returned by certified mail. In that event, such person shall serve a completed third-party claim, together with any unpaid fee, within 20 days following service by NFA [the Secretary]. NFA [The Secretary] shall reject any third-party claim which has not been timely filed, or for which the appropriate fee has not been paid.

(i) Notice to Third-party Respondent.

NFA [The Secretary] shall promptly serve a copy of the completed third-party claim on each person named therein as a Respondent, and a copy of any agreement to arbitrate.

(j) Answer to Third-party Claim.

The third-party Respondent shall serve an Answer on NFA [the Secretary] within 45 days from the date of service of the third-party claim on the Respondent by NFA [the Secretary]. The Respondent shall concurrently serve a copy of the Answer on the third-party Claimant. An allegation in the third-party claim that is not denied in the Answer shall be deemed by the Panel to be admitted.

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(l) Late Answer or Reply.

NFA [The Secretary] shall accept any Answer or Reply filed prior to the hearing. However, NFA [the Secretary] or any party may present an objection to the Panel with regard to the timeliness of any filing.

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SECTION 6. RIGHT TO COUNSEL.

(a) A party may be represented at any time throughout the arbitration proceeding, including a mediation proceeding [conference], by an attorney-at-law or other representative and shall serve timely notice in writing on NFA [the Secretary] and the other parties of the name and address of any such representative. The Panel may bar from the proceeding any representative for dilatory, disruptive or contumacious conduct.

(b) A representative of a party may withdraw upon submitting to NFA [the Secretary] an affidavit that the party represented has actual knowledge of the withdrawal or that the representative has made a good faith effort to provide such notice.

SECTION 7. PRE-HEARING.

(a) Exchange of Documents and Written Information.

(1) The parties shall cooperate, without resort to issuance of subpoenas, in the voluntary exchange of material and relevant documents and written information which may serve to facilitate a fair, equitable and expeditious hearing.

(2) When a claim is accepted by NFA and served on each person named as a Respondent, NFA shall identify, from a list approved by NFA's Board of Directors, documents to be automatically exchanged between the parties. The parties shall exchange those documents no later than 15 days after the last pleading is due.

(3)[(2)] All other requests for documents and written information shall be served on the responding party by the requesting party no later than 30 days after the last pleading is due. The responding party shall serve the requesting party with the documents and written information, including written objections, no later than 30 days after the request is due. [Written requests to compel production of documents and written information must be served on the Secretary and all parties no later than 10 days after the written objections are due, and written responses to the request to compel must be served on the Secretary and all parties no later than 10 days after the request to compel was served. Unless the Panel directs otherwise, requests to compel will be decided on the written submissions of the parties.]

(4) Written requests to compel production of documents and written information must be served on NFA and all parties no later than 10 days after the written objections are due. Written responses to the request to compel must be served on the Secretary and all parties no later than 10 days after the request to compel was served.

(5) A request to compel must include a written certification by the filing party or its representative. The certification must state that the filing party or its representative has made a good faith effort to resolve the matters forming the basis for the request through either a telephone conference or in-person meeting with the other party or its representative.

(6) Unless the Panel directs otherwise, requests to compel will be decided on the written submissions of the parties. The Panel, in its discretion, may schedule a discovery conference to decide any outstanding discovery issues. The conference may be conducted in person or by telephone.

(7) A request to compel that is not timely filed under Section 7(a)(4) above will not be allowed except for good cause shown as to why it was late.

(8)[(4)] Evidence that is otherwise discoverable or admissible in an arbitration proceeding shall not be rendered non-discoverable or inadmissible as a result of its use in connection with a mediation proceeding [conference]. However, documents and written information in the mediator's possession are not subject to discovery and may not be subpoenaed for use in the subsequent arbitration hearing.

(b) Documents to be Introduced into Evidence.

(1) At least 35 [15] days prior to the date assigned for an oral hearing, each party shall serve on every other party all documents in such party's possession which the party intends to introduce into evidence at the hearing as part of its direct case and shall concurrently serve sufficient copies of the documents on NFA [the Secretary].

(2) At least 15 days before the date assigned for a summary proceeding to commence, each party shall serve on NFA [the Secretary] sufficient copies of all documents in such party's possession which are to be submitted to the Panel as part of the party's case and shall concurrently serve copies on every other party. At least five days before the date assigned for a summary proceeding to commence, each party shall serve on NFA [the Secretary] sufficient copies of all documents in such party's possession which are to be submitted to the Panel to rebut the documents previously served by another party and shall concurrently serve copies on every other party.

(c) Hearing Plan.

The parties shall cooperate with NFA in the formulation of a written hearing plan. A hearing plan is a written document that summarizes each claim, Answer and Reply; identifies any facts the parties have agreed to; identifies the factual and legal issues in dispute; and lists the witnesses and exhibits that will be presented at the hearing. The parties shall serve on NFA and all parties a joint hearing plan, or separate plans if they cannot agree on a joint one, no later than 30 days before the oral hearing date. The Panel, in its discretion, may conduct a hearing plan conference with the parties in person or by telephone to modify the plan. [The Panel may order the parties to formulate a written hearing plan and set a date for serving it on NFA.]

(d) Failure to Comply.

The failure of any party to comply with Sections 7(a) through 7(c) or any order of the Panel may be brought to the attention of the Panel by NFA [the Secretary] or the party seeking such documents or information. The Panel may take such actions in regard to the failure as are just, including, among other things, the following:

(1) finding that the matters regarding which the request was made or any other designated facts shall be taken to be established for the purpose of the action in accordance with the claim of the party making the request;

(2) refusing to allow the nonresponsive party to support or oppose designated claims or defenses or prohibiting him from introducing designated matters in evidence;

(3) striking out pleadings or portions thereof, staying further proceedings until the nonresponsive party complies with the request, dismissing the action or proceeding or any part thereof, or rendering an award by default against the nonresponsive party; [.]

(4) refusing to hear the testimony of any witness or to accept any document into evidence if the witness or document was not listed in the hearing plan.

(e) Other Pre-Hearing Motions.

(1) Motions to dismiss for failing to state a claim will not be heard by the Panel. Other motions to dismiss must be included in a timely filed Answer or Reply. Motions for summary judgment may be raised at any time. Motions for directed verdict may be raised at the hearing.

(2) Except as provided in Section 7(a) (4) [(2)] above, a party has 10 days from the date a pre-hearing motion is received in which to serve a written response on NFA [the Secretary] and all other parties. However, where a motion is received less than 20 days in advance of the date the hearing or summary proceeding is scheduled to commence, NFA may, in its discretion, require a written response within less than 10 days. No written replies to a party's response to a motion will be allowed except in the Panel's discretion.

(f) Pre-hearing Decisions by the Arbitrators.

With the consent of the other Panel members, one or more of the arbitrators may act on behalf of the Panel to decide any pre-hearing motions from the parties or to conduct any discovery or hearing plan conference with the parties. However, the Panel may not postpone the hearing or impose sanctions without a majority decision.

SECTION 9. HEARING.

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(b) Notice of Hearing.

The place and time of the hearing shall be determined in the sole discretion of the Secretary, who shall endeavor to accommodate, if possible, the preferences of all parties and members of the Panel. Upon setting the initial hearing date, NFA [the Secretary] shall serve notice on each party at least 45 [20] days before the hearing of the date, time and place. NFA [The Secretary] shall give reasonable notice of any rescheduled hearing date.

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(d) Procedure.

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(9) All conduct and statements, offers and promises, whether oral or written, made by the parties or their representatives in connection with a mediation proceeding [conference] shall be confidential and shall not be admissible for any purpose, including impeachment, in any pending or subsequent arbitration proceeding. The mediator may not be called as a witness in a pending or subsequent arbitration proceeding.

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(g) Reopening the Record.

The record may be reopened by the Panel on its own motion or on the motion of a party for good cause at any time prior to the Panel rendering its [issuance of the] award. A motion to reopen the record shall stay automatically the time period in which the award shall be rendered [issued].

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(i) Summary Proceeding.

The proceeding shall be conducted entirely through written submissions when:

(1) the aggregate amount of the claims (exclusive of interest and costs) does not exceed $10,000, unless the Secretary or the Panel directs otherwise;

(2) the aggregate amount of the claims (exclusive of interest and costs) is more than $10,000 but not more than $20,000, unless the Secretary or the Panel directs otherwise or one of the parties to the proceeding serves a written request for an oral hearing on NFA [the Secretary] no later than 30 days after the last pleading is due; or

(3) the Panel has consented to the written agreement of the parties to waive the oral hearing. A written agreement is not required of any party which has waived its right to an oral hearing under any other provision of these Rules.

SECTION 10. AWARD, SETTLEMENT AND WITHDRAWAL

(a) Issuance.

Within 30 days after the record is closed, the Panel shall render its award, in writing, dated and signed by the Panel members, which shall be delivered to NFA [the Secretary], who shall promptly serve a copy on each party or its representative either personally or by certified mail. The award shall be that of the Panel majority.

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(c) Finality.

The Panel's award shall be final on the date thereof. The award may be modified by the Panel if a party submits a written request for modification which is received by NFA [the Secretary] within 20 days from the date of service of the award on the parties, and the Panel deems modification necessary because:

(1) there is an evident material miscalculation of figures or an evident material mistake in the description of any person, thing, or property referred to in the award;

(2) the arbitrators have awarded upon a matter not submitted to them, unless it is a matter not affecting the merits of the decision upon the matter submitted; or

(3) the award is imperfect in matter of form not affecting the merits of the controversy.

The timely filing of a request for modification shall stay automatically the finality of any award until the Panel either modifies the award or denies the request for modification.

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(g) Failure to Comply

(1) [The failure of a Member or Associate to comply with an award or a settlement agreement or to pay any fee assessed under Sections 11 or 12 shall be grounds for disciplinary action under NFA Compliance Rules (See Compliance Rule 2-5).] When any Member or Associate fails to comply with an award [or pay any fee] within 30 days from the date of service of the award by NFA or fails to comply with a settlement agreement within 30 days after NFA terminates the arbitration proceeding pursuant to Section 10(h) or such other period as specified in the award or settlement agreement, or fails to pay any fee assessed within the time so ordered by the Panel, and unless there is pending a request to modify the award under Section 10(c) or an application to vacate, modify or correct the award in a court of competent jurisdiction, that Member or Associate may, on 30 days written notice, be summarily suspended by the President until such award, [or] settlement agreement, or order of the Panel has been satisfied. Any Member or Associate subject to a summary suspension may, within 30 days of the date of service of the Notice of Suspension, appeal the suspension to the Commission and may, within 10 days of service of the Notice of Suspension, petition the Commission for a stay of the suspension.

(2) A Member which guaranteed an introducing broker during the relevant time may, on 30 days written notice, be summarily suspended by the President if the guarantor fails to pay an award issued against the introducing broker under Section 10(c) or a settlement agreement entered into by the introducing broker under Section 10(h) within 30 days after the guarantor has received actual notice that the introducing broker has failed to comply with the award or settlement agreement. The suspension shall be lifted if the award or settlement agreement is satisfied.

(3) In lieu of or in addition to suspending any Member or Associate for failing to comply with an award, settlement agreement or Panel order to pay a fee or monetary sanction, NFA may initiate disciplinary action under its Compliance Rules for the failure of any Member or Associate to comply with the award, settlement agreement or Panel's order.

(h) Satisfaction of Demand.

At any time during the course of an arbitration, a party may satisfy a claim by payment or settlement, including settlement through mediation. The arbitration proceeding will terminate upon receipt of written notice of satisfaction and withdrawal of the claim duly executed by the parties and submitted to NFA [the Secretary]. If NFA [the Secretary] is notified that a claim has been settled, but the notification is not in writing or is not duly executed by the parties, NFA [the Secretary] shall send written notice to the parties that the arbitration proceeding will terminate within 20 days of service of such notice unless NFA [the Secretary] receives written notice that the claim has not been settled.

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(j) Withdrawal of Claim.

(1) At any time during the course of the arbitration, a party may withdraw a claim against any Respondent who has not filed an Answer. A written notice of withdrawal must be filed with NFA [the Secretary]. The withdrawal will be without prejudice unless the notice states otherwise.

(2) After a party has filed a pleading, a party may not withdraw a claim against that party unless the party consents. The notice and the consent must be in writing and filed with NFA [the Secretary]. The withdrawal will be without prejudice unless the notice or the consent states otherwise.

SECTION 11. ARBITRATION FEES.

(a) Filing and Hearing Fees.

Each Member or Associate filing a claim under these Rules shall pay a filing and hearing fee based on the amount claimed, including punitive and treble damages but exclusive of interest and costs, as follows:
Amount of Claim
Filing Fee
Hearing Fee
$ 0.00 - $ 10,000.00
$ 750.00
$ 50.00
$ 10,000.01 - $ 20,000.00
$ 1,900.00
$ 150.00
$ 20,000.01 - $150,000.00
$ 4,400.00
$ 725.00
$150,000.01 - $500,000.00
$ 4,400.00
$ 1,450.00
More than $500,000.00
[$150,000.00]
$ 4,400.00
$ 2,900.00
[$1,450.00]

NFA will assess hearing fees for discovery conferences, hearing plan conferences, and preliminary or other hearing sessions. Where the hearing fees paid by the parties is not enough to cover the standard preset fees to be paid by NFA to the arbitrators, NFA shall collect additional fees to cover the fees to be paid to the arbitrators. If a case requires more than four days of hearing, the hearing fees will be twice the standard preset fees, unless the arbitrators order the fees to remain at the standard amount. [Where multiple hearing sessions, including preliminary hearing sessions, are required in excess of those covered by the hearing fee, the arbitrators shall assess fees for the additional hearing sessions in an amount equal to the standard preset fees to be paid by the Secretary to the arbitrators for the additional hearing sessions.] The arbitrators, in their discretion, may assess the entire fee against any party or may divide the fee among any or all parties. Hearing [session] fees shall be paid to NFA [the Secretary] in advance of the hearing sessions to which they apply.

(b) Refunds.

(1) A full refund of any filing and hearing fees paid under Section 11(a) above shall be made if, prior to the appointment of a Panel, a claim filed under Section 2 above is found to be not arbitrable.

(2) If all claims have been settled or withdrawn and NFA [the Secretary] receives written notice of the settlement or withdrawal at least eight days in advance of the first scheduled hearing or preliminary hearing date, the hearing fee shall be refunded to the party paying the fee.

(c) Postponement Fees.

Each party causing an adjournment or postponement of any scheduled oral hearing shall pay to NFA [the Secretary] a postponement fee of $300 for the first postponement request by that party, $500 for the second request by that party, and $1,000 for any subsequent request by that party. This fee may be waived at the discretion of the arbitrators. The arbitrators also may assess reasonable and necessary expenses incurred by the parties and their witnesses, including reasonable attorneys' fees, as a result of a postponement. No fee shall be assessed if an arbitrator becomes ineligible or otherwise unable to serve, or if a hearing extends over the expected time period.

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SECTION 15. MISCELLANEOUS.

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(b) Service of Process.

Unless otherwise indicated, service may be accomplished by hand delivery, or by first class or certified mail, or by use of a generally recognized overnight delivery service to the party's last known business or home address on record with NFA. All documents which are served on NFA [the Secretary] shall be concurrently served on each party who has filed a pleading. Service on a party's representative shall be service on the party.

(c) Address of Record.

A party shall promptly notify NFA [the Secretary] of any change in the party's address or addresses or the address of the party's representative on record with NFA.

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