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NASD Issues Proposed Rule Revising Filing Fees

  • November 2005

    On April 25, 2005, the NASD proposed a new rule (the "Proposed Rule") reducing the fees associates with filing an NASD arbitration concerning federal statutory employment discrimination claims that are subject to pre-dispute mandatory arbitration agreements (such as Form U-4 agreements). The Proposed Rule will cap the fees for filing statutory employment discrimination claims subject to a pre-dispute mandatory arbitration agreement at $200.

    Although there are specific NASD procedural rules governing the arbitration of statutory employment discrimination claims, currently there is no specific fee structure for the filing of statutory employment discrimination claims. Instead, an employee of a broker-dealer filing a statutory employment discrimination action in the NASD arbitration forum must adhere to the same filing fee structure that is applicable to customer disputes. Accordingly, the filing fee and hearing session deposit for an employment discrimination claim is based upon the dollar value of the claim. Consequently, the fee for filing a statutory employment discrimination claim in the NASD arbitration forum can be prohibitively expensive.

    Therefore, under the current fee structure, when there is a pre-dispute mandatory arbitration agreement in place, the cost to arbitrate an employment discrimination claim can hurt both the employee of the broker-dealer and the broker-dealer itself. The expense of filing an employment discrimination claim in the NASD arbitration forum can either deter the employee from arbitrating his employment discrimination claim or cause a court to invalidate a pre-dispute mandatory arbitration agreement, eroding the broker-dealer's contractual rights.

    To resolve this issue, the NASD filed the Proposed Rule. Setting the maximum non-refundable fee for filing a statutory employment discrimination claim at $200, the Proposed Rule revises the current filing fee structure, ensuring that employees of broker-dealers are effectively able to vindicate their statutory employment discrimination claims when they execute a pre-dispute mandatory arbitration agreement. The broker-dealer on the other side of the employment discrimination claim is expected to pay the remainder of the filing fee and any forum fees. Additionally, under the Proposed Rule, the NASD will not require hearing session deposits.

    In view of the NASD's efforts to ease the arbitration of employment discrimination claims; the recent opening of the Hartford, Connecticut venue for NASD securities arbitrations; and the precedent of the courts within the Second Circuit (including the district of Connecticut ordering employment discrimination claims to be arbitrated pursuant to Form U-4 agreements), Connecticut broker-dealers should be prepared to defend against the influx of statutory employment discrimination claims.

NASD Issues Proposed Rule Revising Filing Fees

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