Arbitrator Update

January 2013 Issue

Table of Contents:

Arbitrator Profile: Kathy Hodge

How Much Time Will This Hearing Take?

Year-end Statistics

Arbitrator Training

Arbitrator Profile: Kathy Hodge

As a student, Kathy Hodge worked in the Financial Aid office at the University of Massachusetts. She loved the busy, ever changing office environment, where the phones were constantly ringing, frantic students were running in and out all day, and downtime was essentially non-existent. Yet, after receiving her degrees in Microbiology and Chemistry, Kathy left the Financial Aid office behind and headed into the lab. While there, it didn't take long for Kathy to realize lab work wasn't for her. She missed the fast pace she'd grown accustomed to so she began to explore her love of finance.

Kathy began her financial career as a stock options sales assistant at LF Rothschild, Unterberg and Towbin in Boston. She quickly realized, however, that if she wanted to pursue a career in trading, she would need to relocate to New York City. Upon arriving in New York, Kathy began working for a hedge fund where she learned all about how products are cleared. Then, in 1989, when a commodity options position opened up at Prudential, she moved on. Kathy quickly became an Operations Manager at Prudential, and she remained in management there for several years before making the transition to the energy markets.

Energy trading was Kathy's calling and she was right where she wanted to be. Becoming a trader wasn't easy to come by, however. When Kathy started her career in finance, she was one of very few women. She faced some strong resistance, and was told, "Only big men are traders!" However, as the only girl in her family, Kathy was taught that she could do anything her brothers could do. So, she put her mind to it, buckled down and worked hard to prove herself. Kathy's science degrees helped her tremendously when it came to understanding the oil refining process and she was fortunate enough to work with supervisors, mentors, co-workers and clients who taught her a great deal.

Today Kathy continues to focus on the energy futures markets and the oil industry as a whole. She is an energy consultant who provides advice on everything from hedging to venture capital projects.

Kathy was born in New England, but her heart is in New York City, and she says she can't imagine living anywhere else. Unfortunately her Manhattan home was a victim of Hurricane Sandy, and she is in the middle of what will prove to be a very lengthy cleanup and restoration process. Kathy remains positive however, and said, "It could have been much worse. I have friends that have lost everything." Kathy is volunteering her time to help her friends and the city she loves recover as quickly as possible.

Kathy believes in NFA's arbitration forum and feels it is extremely important that the industry resolves its disputes fairly and quickly. As an arbitrator, Kathy's greatest challenge is sifting through the voluminous amount of documents the parties submit. Nevertheless, she enjoys serving for us and appreciates the fact that our case administrators do a lot of the administrative leg work so she and her fellow panelists can focus on reviewing the merits of their cases. As a forum, we are extremely fortunate to have Kathy's expertise and experience to call on.

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How Much Time Will This Hearing Take?

Unlike other dispute resolutions forums, NFA collects both filing and hearing fees from the Claimant when a claim is filed. Our fee schedule is based on claim amount, and the hearing fees we collect are directly tied to the number of days the hearing is expected to last. While scheduling a hearing is not an exact science, in our experience, most claims can be heard in the time frame suggested by the fee schedule, which correlates to the entire claim amount. Lately, however, parties have suggested scheduling additional hearing days "just in case". When reviewing these types of requests, we ask that you keep the following things in mind.

Experience has shown that parties tend to use all the days that are scheduled and forget that arbitration is supposed to be a more efficient process than trial court. Therefore, it's worth questioning the parties about why they believe additional time is warranted. If additional days are scheduled, the parties will be required to submit additional hearing fees, and the panel will need to decide who is responsible for those fees or how the fees will be split among the parties. Additional days may also lead to increased legal fees and travel expenses for the parties. Therefore, the panel should only schedule additional days when there is a legitimate reason for doing so since NFA always strives to maintain a low-cost and efficient forum.

Once the hearing has begun, the panel's top priority is to maintain control of the proceeding while ensuring each side is given a full and fair opportunity to present its case. Striking the correct balance between fairness and control is one of the most difficult aspects of serving on a panel. However, because an arbitration hearing is much less formal-and therefore more flexible-than a court of law, panels have a lot of latitude when it comes to guiding the proceeding and ruling on substantive matters. For example, panels can refuse to let a witness testify if the testimony is repetitive or irrelevant. Therefore, it is perfectly acceptable for you to inquire about the content of a witness' testimony before he takes the stand or to remind counsel to stick to questions that elicit new testimony to support their case. It is also perfectly acceptable to set time limits on closing statements, require the parties to take short lunches or put in more than eight hours per day, if you are running short on time. The authority vested in arbitrators by courts and legislatures is considerable, and this allows you-not the parties or their attorneys-to control the hearing. We know it isn't always easy, but we count on you to keep things moving.

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Year-end Statistics

Arbitration filings continued to decrease in 2012. NFA received 81 claims last year which is down slightly from the 88 claims we received in 2011. While we haven't seen numbers like this in quite some time, the downtrend is consistent with other dispute resolution forums.

NFA staff closed 105 cases in 2012. 21% of those cases resulted in an oral hearing or summary proceeding, 33% of the cases settled and 46% were rejected or withdrawn.

NFA Arbitrators presided over 22 proceedings in 2012: eight summaries and 14 oral hearings. 12 proceedings took place in Illinois, while four took place in New York. The remaining proceedings were held in Arizona, California, Florida, Georgia, Oregon and Texas.

For more statistical data, please see our website at http://www.nfa.futures.org/NFA-arbitration-mediation/arbitration-statistics.HTML.

Arbitrator Training

As you know, in order to remain eligible to serve as an NFA arbitrator, you are required to complete an arbitrator training program at least once every three years. In an effort to provide a convenient and efficient method for arbitrators to satisfy this requirement, NFA now offers an online training program. The program is broken up into modules, and completing any one or more of the modules satisfies your requirement for three years. We offer a comprehensive overview module, along with modules that focus on specific topics such as pre-hearing conference calls and the role of a panel chairperson. All three modules are available at http://www.nfa.futures.org/NFA-arbitration-mediation/online-training.HTML.

In addition, staff is about to begin working on a new module that will focus on motion practice. If you have any specific questions you would like NFA to address or ideas for future training topics, please email them to our arbitrator coordinator, Judy Jenks, at jjenks@nfa.futures.org.