SICA Pilot Program To Provide Investors Choice Of Non-SRO Forum for Resolution Of Disputes

The Securities Industry Conference on Arbitration (SICA) is set to launch a two-year pilot program to provide customers with a broader choice of arbitration forums where they may resolve disputes with their brokerage firm. SICA is an organization comprised of public members (representatives of the investing public), the Securities Industry Association (SIA), and the securities self-regulatory organizations (SROs) that provide an arbitration forum for the resolution of disputes in the securities industry, such as the National Association of Securities Dealers (NASD), New York Stock Exchange (NYSE) and other exchanges. Arbitration has long been used to resolve customer/broker disputes because it is relatively fast and is an efficient alternative to the courtroom. Many investors sign a customer agreement that contains a provision calling for disputes regarding their account to be resolved by arbitration at one of the SROs when they open a securities account at a brokerage firm. Moreover, the SROs and the securities industry subsidize arbitration to make it less expensive for customers to resolve disputes. To give public customers choice, SICA developed the pilot program to determine if in fact an alternate forum would be attractive to investors, notwithstanding its cost. SICA developed guidelines for the pilot program. The guidelines provide for the voluntary participation of brokerage firms that will designate one or more non-SRO forums where a customer may file a claim. The choice to go to a non-SRO forum is up to the Customer. The guidelines also set forth minimum due-process requirements that the non-SRO forums must meet to be eligible for the pilot program. At present, seven retail brokerage firms have volunteered to participate in the two year pilot: Merrill Lynch, Morgan Stanley Dean Witter, PaineWebber, Prudential Securities, Salomon Smith Barney, A.G. Edwards, and Raymond James. Collectively the firms have agreed to arbitrate, to award, 100 cases at a non-SRO forum during the two-year pilot. Because many cases are settled before arbitrators issue an award, it is expected that more than 100 cases will be administered under the pilot program. Beginning Jan. 24, 2000, some customers whose claims qualify under the pilot program will have a choice to arbitrate at an SRO or the non-SRO forum(s) designated by the firm. Customers whose claims qualify under the pilot may file directly with the non-SRO forum selected by the firm. In addition, customers who file a claim with an SRO against one of the seven participating firms will be advised, if the claim qualifies, that they may arbitrate the dispute at a non-SRO forum. The customer may then choose whether to proceed at the non-SRO forum or remain in the SRO forum. For additional information, contact Prof. Thomas J. Stipanowich, University of Kentucky College of Law, 139 Law Building, Lexington, KY 40506-0048, Tel. +1 606-257-3998, Fax +1 606-323-1061, E-mail: tstipano@pop.uky.edu