In addition to traditional securities litigation in the US there is an alternative a increasing trend for dispute resolution in the US Securities Industry, the “alternative dispute resolution’ or ADR.
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ADR is per se not a new approach to dispute resolution at all but is increasingly common within the US Securities Industry. Since the 1800’s ADR has already been used in the US Securities Industry . Despite criticism and concerns whether ADR, and in particular the arbitrators, are bound and have to follow the dictate of the law , arbitration in particular, due to an overcrowded court system is faster, more cost-efficient , and due to several opinions of the United States Supreme Court by removing any barriers to resolving securities cases through arbitration the use of ADR, has increased dramatically during the last decade .
The process of alternative dispute resolution was used by securities institutions such as the New York Stock Exchange as early as 1817 . Since 1872, the securities exchanges and regulators have developed rules for the fair and effective administration of disputes . As of today most present disputes between the securities industry and its customers, as well as those among the securities industry, in particular between the securities industry members and their employees, are all channeled into arbitration or submitted to mediation or other alternative dispute resolution processes usually at securities dispute resolution forums . Beginning in 1971, Congress granted the SEC “expansive power” to ensure the adequacy of the various exchanges and NASD’s arbitration rules and procedures .
Before illustrating the relevant law for ADR in the US securities industry, it is essential to understand how the securities industry in general is regulated and organized.
IV. ADR relevant US and Securities laws
There is various general US, and in particular Securities US law, that governs and effects procedures within ADR. General US Federal and State civil procure law also influences ADR and its process , as well as a variety of US Securities laws that from case to case apply. The following laws represent an excerpt of the most relevant codes and rules affecting ADR in the US Securities Industry.
1. Federal Arbitration Act of 1925
The Federal Arbitration Act (“FAA”) became law in 1925 and embodies a strong public policy favoring the ADR process of arbitration without mandating federal jurisdiction . The FAA has 16 sections; some sections are pointed out in the following. Under Section 1 the FAA applies with some exception to all contracts affecting commerce, where commerce understood by the Supreme Court as most economic transactions .
The Uniform Arbitration Act (UAA) from 1955 was intended to harmonize the arbitration law within the U.S. states and has been one of the most successful Acts of the National Conference of Commissioners on Uniform State Laws with 49 jurisdictions that have adopted substantially similar legislation . The UAA has 25 sections. Its purpose is to validate arbitration agreements, but also make arbitration process effective by providing necessary safeguards and an efficient procedure for arbitration .
3. Uniform Mediation Act
4. Securities Act of 1933 and Securities Exchange Act of 1934
A claim before ADR may be based on a violation of federal securities law . The Securities Act of 1933 and 1934 are the cornerstone of Federal Securities Law and build the foundation for investor protection in the United States . While most claims under the Securities Acts are brought as class actions pursuant to PSLRA before Federal Courts, purchasers of registered securities are also able to bring claims under the Securities Acts to ADR . The Securities Act of 1933 is designed to regulated the initial public offering of securities and ensure that investors receive enough significant and material information thereof, whereas the Securities Act of 1934 is intended to regulate the trading in securities which are already issued and outstanding .
a) Securities Act of 1933
Between 1911 and 1933 the securities industry was regulated at state level by so called “blue-sky law” , but due to the financial crisis surrounding the Black Thursday of 1929 and the Great Depression the US congress enacted at Federal Level in 1933 the Securities Act of 1933 or Federal Securities Act . The Securities Act of 1933 focuses on a single regulatory provision and requires that any issuance of securities to public investors be registered by filing a registration statement with the SEC, unless an exemption from the registration exists under the law . Rule 144, promulgated by the SEC under the 1933 Act, permits, under limited circumstances, the sale of restricted and controlled securities without registration Sections 6,7, and 8 of the Securities Act of 1933 contain a statutory scheme for the registration process . The Securities Act of 1933 is in some respect a criminal statue and anyone who signs the registration statement is subject to liability under section 11 for any material misstatement or omission therein . A purchaser of a registered security may sue a single person or jointly the securities issuer, the companies chief executive, financial and accounting officers, each director, underwriter, and each accountant or other experts under Section 11 of the Securities Act of 1933 when a registration statements contains “an untrue statement of a material fact or omit[s] to state a material fact required to e stated therein or necessary to make the statements therein not misleading”. Section 12 is broader than Section 11 of the Securities Act of 1993 and has two parts. Section 12 (a)(1) provides a purchaser of a registered security the right to bring an action against a person that “offers or sells a security in violation of section 5” . Section 12(a)(2) take over where Section 11 leaves off and furnishes the purchaser of a registered security with the right to hold any person who offers or sells a security liable, if the purchaser acquired the securities by “means of a prospectus or oral communication” which includes a material misstatement or omission .Section 15 mandates that in general anyone who controls a person liable under Section 11 or 12 is jointly and severally liable to the same extent as the controlled person . Section 17(a), the antifraud provision of the Securities Act of 1933, is a provision of criminal character that covers fraud in the offer or sale of securities . Section 17 is not only limited to the initial offering, but also for fraud in the secondary market .
b) Securities Exchange Act of 1934
The Securities Exchange Act focus is on the secondary market and the securities market regulation . The Securities Exchange Act of 1934 covers the creation of the SEC, regulation of the stock exchanges and securities firms through the SROs, and other important instruments of the securities industry regulation . It requires brokers and dealers to register with the SEC and regulate their activities . Besides provisions that impose disclosure and other requirements on publicly traded companies , the Securities Exchange Act of 1934 contains a number of provisions that may lead to civil liability of different participants of the securities trading process . In addition to the provisions of the Securities Exchange Act of 1934 there are additional general rules and regulations promulgated under the Securities Exchange Act of 1934. The most important provision for investor protection is clearly Rule 10b5, the securities antifraud rule promulgated under the Securities Exchange Act of 1934 . Every securities transaction lives under its protective shade . Rule 10b5 is very similar to the wording of Section 17(a) of the Securities Act of 1933 . While Section 17(a) covers fraud in the sale or offer of securities, rule 10b-5 covers fraud in the purchase or sale of securities in the secondary market . Typical 10b5 cases include, securities trading, where a party to a securities gives false or misleading information, corporate trading, where a corporate manager induces the corporation to enter into a disadvantageous securities transaction, corporate disclosures, where a corporation issues false or misleading information to the public, insider trading, where corporate insiders either use confidential corporation information to take advantage or tip the information to others, outsider trading, where outsiders with no relationship to the corporation use confidential information about the company to their advantage, and customer- broker disputes, where securities professionals engage in deceptive or other unprofessional conduct.
Rules 10b-5 does not itself specify the elements a plaintiff must show to be entitled to recovery, but the Supreme Court has identified the following elements. A plaintiff has to show that the defendant affirmatively misrepresented a material fact or omitted a material fact that made the statement misleading (material misinformation), that the defendant knew or was reckless in not knowing of the misrepresentation (scienter), that the plaintiff relied on the misrepresentation (reliance), that the plaintiff suffered actual losses as a result of the reliance (causation or loss causation), and finally that the plaintiff suffered damages (damages) . Claims under 10b-5 are today commonly heard in Federal courts after the Private Securities Litigation Reform Act of 1995 (PSLRA) reduce the abuse of the random securities lawsuits in order to address the problem of “professional plaintiffs” and other abusive practices . The Securities Litigation Uniform Standards Act of 1998 (or Uniform Standard Act, “SLUSA”) also preempted the role of state law and state courts. It closes the gap of PSLRA and requires that also claims under Section 11 and 12 of the Securities Act of 1933 be brought in Federal Court , but SLUSA does not apply for individual or derivative lawsuits . While the Securities Act of 1933 was rarely amended, the Securities Exchange Act of 1934 experienced a number of amendments .
5. The Uniform Securities Act
Since not all investments are covered federally and not all investment dealers are registered at the federal level the NCCUSL created in 1956 the Uniform Securities Act (“USA”). The USA provides guidance for each state in voluntary drafting its state securities laws . The most recent revision of the Act is the Uniform Securities Act of 2002 .
6. The Securities Investor Protection Act of 1970
A larger number of brokerage firms experienced various types of financial difficulties in the 1960s and a financial collapse of one of its large member firms in 1963 , resulted in the Securities Investor Protection Act of 1970, which established the Securities Investor Protection Corporation or ‘SIPC’ . The SIPC is responsible for establishing and maintaining a fund for the benefit of injured investors . It becomes a party to proceedings to liquidate securities broker-dealer which gets into financial difficulties and to arrange for the payment of claims asserted by their customers . The SIPC provides coverage to injured investors up to $500,000 per customer, but only up to $100,000 in cash if the investor has a claim for cash as opposed to a claim for securities .
In the 1970s most SROs had their own separate rules for administering securities arbitration disputes. The SEC’s Office of Consumer Affairs recommended the adoption of uniform alternative procedures for handling investor disputes and the creation of a new entity to administer them and as a result the Securities Industry Conference on Arbitration (“SICA”) was established in April 1977.
a) NASD / FINRA ADR Rules
The NASD adopted and further developed the SICA Uniform Code as the NASD Code of Arbitration . Following the formation of FINRA the SICA no longer maintained or continued to amend the Uniform Code . Later FINRA’s Uniform Code of Arbitration was superseded by the Customer Code (Rule 12000 Series) and the Industry Code (Rule 13000 Series) on April 16, 2007 for claims filed on or after that date. The NASD Uniform Code of Arbitration remained in effect for cases filed before April 16, 2007. FINRA’s Uniform Code of Arbitration Procedure consists of a code arbitration procedure with general provisions and a Code of Arbitration Procedure for Customer Disputes and for Industry Disputes.
b) ADR Rules of other SROs
Other SROs that implemented ADR Rules within their legal framework are for instance the NYSE and the NFA. The NYSE Regulation, a subsidiary of NYSE, continues to be responsible for monitoring trading that occurs on NYSE and NYSE Arca, Inc., and conducting investigations of suspicious trades.
In addition to SRO Securities ADR forums like FINRA and NFA there are also non-SRO Securities ADR forum that can be utilized for ADR within the Securities Industry by parties either by consensus or by written pre-agreement.
American Arbitration Association has among various arbitration and mediation provisions general specific provisions for commercial Arbitration and Mediation rules that apply in connection with its Securities Arbitration supplementary procedure provisions whenever the parties' arbitration agreement refers to the Securities Arbitration Rules of the American Arbitration Association, or where the parties mutually agree to utilize these Procedures to resolve a securities or commodities disputes
b) Judicial Arbitration and Mediation Service ADR Rules
Judicial Arbitration and Mediation Service or “JAM” is an ADR forum with arbitrators that are mostly former judges . JAMS is used by NFA for mediation purposes .
c) Securities Arbitration Clinic
In order to reduce the costs for arbitration many law schools throughout the United States have initiates securities arbitration clinics. These clinics are programs, where law students under the supervision of faculty members and lawyers offer mostly free representation before ADR forums, where a representation by a non-attorney is possible.
V. ADR procedures within the Securities Industry
Within the securities industry most of the commonly known alternative dispute resolution processes are applied. For simplicity purposes the following ADR procedures are based on the FINRA, NFA and AAA ADR rules. Due to an increase of costumers in the securities industry, which have signed with their brokerage firm agreements requiring arbitration of all claims arising from the brokerage account, most frequently arbitration is used, followed by most popular ADR form mediation, whereas conciliation and negotiation should be part of every pre arbitration or mediation process.
1. Arbitration within the Securities Industry ADR
Arbitration within the US securities industry is not only the most commonly used form of ADR within the Securities Industry , it is also the most commonly used for of dispute resolution form within the Securities Industry . The Arbitration process in the Securities Industry does not vary drastically from Arbitration in general. Even though Securities Arbitration varies from within each arbitration forum, in general every Securities Arbitration forum includes the following general steps: initiation and filing, arbitrator selection, preliminary hearing, discovery, hearings, post-hearing submissions, award based on the sections of the FAA. The securities arbitration process before FINRA is overseen by the National Arbitration and Mediation Committee . Each procedural step is explained in detail in the following.
a) Initiation and Filing
In order to initiate arbitration the party requesting arbitration needs to address its demand for arbitration at the appropriate arbitration forum either mandated by the arbitration agreement or by both parties consensus. Under FINRA rules the securities arbitration process is initiated by filing an executed statement of claim or complaint including the appropriate filing fees under the FINRA rules .
b) Arbitration Panel Selection
Once the respondent’s answer is received the parties need to agree on an arbitration panel.
Unless otherwise agreed upon securities arbitration claims under $100,000 are heard at the American Arbitration Association before one arbitrator, claims over $100,000 are generally heard before an arbitration panel consisting of three arbitrators . The AAA will submit to each party for disputes heard before a single arbitrator a list of five proposed arbitrators, not be affiliated with the securities industry, drawn from the National Panel of Securities Arbitrators and each party may strike two names from that list . In disputes before an arbitration panel of three arbitrators the AAA generally will provide each party with two lists of arbitrators, one with five names of five names of arbitrators affiliated with the securities industry and the other with ten names of arbitrators not affiliated with the securities industry. The parties will then strike any names objected to if any. From the remaining names on the both lists the AAA will select appoint one arbitrator from the first list and two from the second list . The rules containing provisions about disclosure obligations and ethical standards will be illustrated in Section .
c) Preliminary Hearing
Once the arbitration panel is appointed the parties will meet for a preliminary hearing, which under FINRA Rule 12500/13500 Code of Arbitration for Customer/Industry Disputes, NFA Rule Section 8 (g) of the Code of Arbitration/ Section 7(g) of the NFA Member Arbitration Rules, and Rule 20 of the AAA Commercial Arbitration Rules an initial prehearing conference’ is generally held by telephone.
d) Discovery - Information Exchange and Preparation
Securities arbitration rules encourage each party to cooperate to the fullest extend .
Before a hearing takes place the parties will be notified in advanced of the time and place of the hearing . An oral and personal hearing is in general required in all securities arbitration . Under FINRA Rule 12600 a hearing can be waived for small claims under $25,000 according to Rule 12800 or under Rule 12801. Before NFA the party may waive his right to an oral hearing only by failing to prosecute or defend the proceeding . The AAA does have a similar provision to FINRA’s provision to waive an oral hearing for small claims but under $20,000 specifically for securities arbitration in its Securities Arbitration Supplementary Procedures Rule 5.
f) Posthearing Submissions
After the hearing the parties can if necessary file additional documentation or reopen the hearing/record under special circumstances.
Once the arbitration is closed the arbitration panel will render within 30 days a decision by majority vote if the panel consists of more than one arbitrator . The award can then be entered in court as a judgment . Even though controversial discussed arbitrators are generally not required to be instructed on the law and to follow the law . The arbitration panel generally awards compensatory and sometimes punitive damages .
Arbitration is faster and cheaper then litigation , but it is of course not for free. Securities arbitration under FINRA Code of Arbitration for Customer/Industry Disputes can include fees for filing, injunctive relief, member surcharge, amended claim, member prehearing process, member hearing process, adjournment, hearing session, settlements-forum allocation, hearing session, and forum. Securities Arbitration at AAA can include initial filing, proceed and final fees. No matter before what arbitration forum the securities arbitration is conducted costumers can expect to pay hundreds/thousands of dollar in fees depending on their amount of claim .
2. Mediation within the Securities Industry ADR
Whereas Arbitration is often used due to its commonly used arbitration agreements in the securities industry, non-binding mediation is the most popular form of ADR and is often described as “assisted negotiation of a dispute settlement” . Either during securities arbitration or instead of arbitration at all, parties of a securities dispute can mediate and settle their dispute . Since mediation before NFA can be done by a mediation forum of choice and the NFA offers a list including among others the AAA, it will be assumed that the provisions of AAA generally apply.
a) Distinction between Mediation and Arbitration
The most important distinction between mediation and arbitration in general and also within the securities industry is that in mediation a neutral only assists the parties in settling their dispute, while in arbitration an arbitration panel renders a decision . Mediation often includes some type of innovative ‘outside the box’ approach and where in arbitration on the other hand is little room for such initiatives, because the arbitration panel decides the case solely on the basis of the evidence presented and the demands made .
b) Distinction between Mediation and Conciliation
Mediation also differs from conciliation most importantly in its results. In the less structured conciliation the parties reconcile and mend their relationship, whereas in more structured mediation resulting the dispute stands to the fore and the relationship may not continue . Conciliation is a process where a neutral may not even interact, while in Mediation the mediator may even actively suggest and promote a mutual acceptable settlement .
c) Agreement to Meditate and Initiation
Once the parties have agreed upon mediation, the parties need to initiate the mediation process. Under FINRA Rule 14104 Code of Mediation Procedure “Mediation [..] requires the written agreement of all parties” if the mediation is requested during the arbitration process the arbitration will be not be automatically by stayed, but can be requested by both parties consent . NFA Code of Arbitration does not require a formal agreement from the parties, but will inform according to Section 14 NFA Code of Arbitration/Member Arbitration Rules about the options of mediation and will then have the parties opt for mediation or arbitration. According to Rule M-2 of the AAA Commercial Mediation Procedures the parties may request as well mediation in writing.
d) Mediator selections
Once the parties initiated the mediation process they have to agree on the mediator. Under FINRA they can choose from a list supplied by the director, a list or other source of their own or have the director select one mediator, that is not an arbitrator of any matter pending in FINRA Arbitration, or have any conflict of interest .
e) Mediation Session
Once the parties selected the mediator, the mediator will schedule a date for the (first) mediation session . Even though a mediator does not hold evidentiary hearings as in arbitration a mediator holds informal mediation sessions with the parties in order to understand the issues, facts, and positions of the parties .
In the mediation session the mediation process within the securities industry does not follow are different patterns then any other general mediation . Since mediation is a less formal ADR approach the mediation session may begin with introductory remarks and statement of the problem by the parties, followed by an information gathering time and the identification of the problems. The mediators may then guide the parties in the bargaining and generated with and for them options. The parties may then either come to an agreement or proceed with private causes in order to for instance determine overlaps and discrepancies in their demands, before moving to an extended (‘second’) mediation session where the parties either can find an agreement or close mediation and proceed further with arbitration .
3. Negotiation within the Securities Industry ADR
Negotiation is the resolution of a dispute by the parties without a third party neutral or arbitrator . Negotiation is part of any settlement process and therefore an essential part of arbitration, mediation and also within litigation. Whenever parties agree to settle a dispute negotiation techniques and skills are essential. Negotiation in the Securities Industry is not different from any other negotiation in other commercial disputes. The same negotiation techniques and skills are used and required as in any other negotiation. Negotiation as Securities Industry ADR process may include all or some of the general stage of the negotiation process like preparing to negotiate , preliminary stage , information stage , value claiming stage , closing stage , and value maximizing stage . It is important to keep in mind that within the US securities industry cultural differences within the US business culture influence the negotiation. The United States is considered a low context culture, like many European countries , but it is known for its less formal goal orientated impatient short term trail by error approach .
VI. Special issues in Securities ADR
1. ADR between Securities Industry members such as stock brokers and investors
Within Securities Industry ADR are several special issues that a wroth to be pointed out.
Since most customers have signed agreements when they opened an account with the brokerage firm, they have to either choose among certain arbitration forums or are bound to one specific arbitration forum. Due to an increase in investor complaints, today many clauses now include a choice among several dispute resolutions organizations to administer the arbitration proceedings in case a dispute arises . Nearly all claims for arbitration are being heard at FINRA , but the parties can also agree to another ADR forum or mediation instead of arbitration. In order to achieve this some parties have incorporated the so called ‘Amex Window’ . In addition parties have also a choice to choose a different ADR forum as long as they both agree upon it and do not violated their agreements, mostly arbitration agreements. Most SROs today require that their members consent to arbitrate disputes upon the demand of their customers . Investors might compel a member of an SRO to arbitrate even without a written pre-dispute arbitration agreement .
c) Common allegations against broker/dealer
Under Section 10b5 of the general rules and regulations promulgated under the Securities Exchange Act of 1934 as well as under certain other provisions (such as Section 17(a) of the Securities Act, FINRA Duties and Conflict Rules, NASD Conduct Rules), a number of principles have been developed to hold brokers/dealers to a fair strict standard of conduct . Under the so called “shingle theory a broker by hanging up a shinle implicitly represents that he or she will conduct business in an equitable and professional manner . Before FINRA, NFA, and other Securities ADR forums commonly addressed allegations include misrepresentation, selling an unregistered security, churning, unsuitability claims, unauthorized trading, high pressure sales, breaching the fiduciary duty owed to the investor, as well as other stockbroker misconduct .
Liability for misrepresentation is premised under rule 10-b5 General Rules and Regulations promulgated under the Securities Exchange Act of 1934. Rule 15c1-2, 1-3 of General Rules and Regulations promulgated under the Securities Exchange Act of 1934 and Section 4b of the Commodity Exchange Act (7 U.S.C.§ 6b) prohibit misrepresentation in connection with the purchase or sale of a security and non-disclosure of or downplaying of risks involved in futures and options transactions.
bb) Selling an unregistered Security
With a few exceptions all securities of publicly traded companies need to be registered by filing full disclosure documents with the SEC. Selling an unregistered securities violates Section 5 (a) of the Securities Act of 1933.
Churning by definition is excessive trading in size and frequency of a customer’s financial resources and character of the account . Rule 15(c) 1-7 of the General Rules and Regulations promulgated under the Securities Exchange Act of 1934, NASD 2510 Conduct Rules, NYSE Rule 435, and Section 4b of the Commodity Exchange Act (7 U.S.C. § 6b).prohibit excessive trading by a broker/dealer. Even though there is no per se test to determine whether the activity is excessive, but the customer’s investment objectives, the nature of the account and other circumstances must be considered . Factors and criteria that can be considered are the turnover rate , an in-and-out-trading , proportion of account commissions to size of account, to broker’s total income and to branch’s income , and excessive trading in options .
dd) Unsuitability Claims
Under FINRA Rule 2353/ NASD 2310 Conduct Rules the broker/dealer making a recommendation to an investor must have grounds for believing that the recommendation is suitable for this customer with respect to his or her portfolio, financial situation, and needs, the so called “know your customer rule” , and must investigation the issuer and the terms, risk, and nature of the investment they recommend and “know your securities rule” . Neither the Commodity Exchange Act nor CFTC regulations impose suitability requirements on the futures industry, but NFA has adopted the “know your customer rule” under NFA Compliance Rule 2-30 . An unsuitable recommendation is one which, in light of the customer’s disclosed objectives and background, the broker knows or reasonably believes to be inappropriate . The distinction between unsuitability and churning is that unsuitability focuses on the qualitative, not quantitative, mismatch between investments and the investor’s objective . An example of unsuitability claims can be improper asset allocation and losses due to margin calls.
ee) Unauthorized Trading
Unauthorized Trading is a purchase or sale of a stock by a broker on behalf of an investor, who has not authorized the transaction . The difference to churning is that in churning the investor will show that the excessive trading has occurred to generate brokerage fees and commissions .
ff) High Pressure Sales
The practice of ‘High pressure sales” or ‘Boiler Room Operations’ has been developed by some of the unscrupulous securities brokers and dealers, where callers cold call investors for fraudulent transactions and recommend purchases of large blocks of speculative securities in new companies, prediction dramatic earnings and rapid increases in the market price of the securities . Even though the SEC denies that boiler room activities per se do not constitute a violation of the antifraud provisions, court have however numerous times imposed liability under either the “shingle theory” or antifraud provision . The NFA sees high-pressure sales tactics as violations of the anti-fraud provision of Section 4b of the Commodity Exchange Act violations of the anti-fraud provision of Section 4b of the Commodity Exchange Act .
In order to constitute a fiduciary duty owed by the broker/dealer to the customer the customer has to provide additional facts beyond the general sole broker/dealer – customer relationship in order to show a breach of fiduciary duty .
gg) Other broker/dealer Misconduct
Among other broker/dealer misconduct other misconduct may include a breach of contract. A broker is obligated to get the investor the best execution possible given market conditions. If a broker the purposely delays execution, a broker is liable for breach of contract. The broker negligently executes (or fails to execute) an order and the customer would have gotten a better fill but for the broker’s negligence .
2. Employment related ADR with Securities Industry
ADR within the Securities Industry can not only be used between broker/dealer and customers disputes, but also Securities Industry members disputes, like employment related disputes between Securities Industry members and their employees. The types of employment disputes most often seen in the securities industry are primarily statutory claims, such as discrimination based on age, sex, disability, failure to accommodate, as well as common law claims, such as breach of contract, wrongful termination, layoffs, compensations disputes, and others .
3. Securities Industry ADR and class actions
Under the SLUSA Securities Litigation Uniform Standards Act of 1998, most class actions involving fraud or defects in disclosure relating to the securities of most publicly held companies must be brought in federal court under federal law. The Uniform Code, the NYSE rules and now FINRA’s Code of Arbitration for Customer and Industry Disputes , NFA , and AAA do not allow the submission of a claim as a class action . But the prohibition of class actions does not preclude the consolidation or joinder of claims , which are specifically permitted before FINRA , NFA , and AAA
V. Ethics and Securities Industry ADR
For ADR within the Securities under NSDA/NYSE Regulation, now FINRA, NFA, and AAA the primary source for guidance regarding arbitrator behavior/conduct addressing ethic norms was the 1977 American Bar Association (“ABA”) / AAA Code of Ethics for Arbitrators in Commercial Disputes . It was revised to latest version of the AAA/ABA Revised Code of Ethics [“Code of Ethics”] in 2003/2004 .
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