REGULATORS Rule Limiting TROs Delayed Again

In a surprise move, the NASDR has asked the SEC for yet another extension of the pilot program testing expedited arbitration in temporary restraining order (TRO) cases while it works up a new version of the rule, RR has learned. A permanent rule mandating quick resolution of TRO cases was due to take effect Jan. 3, 2000.TRO cases arise when firms sue departing brokers in an attempt to keep the reps

In a surprise move, the NASDR has asked the SEC for yet another extension of the pilot program testing expedited arbitration in temporary restraining order (TRO) cases while it works up a new version of the rule, RR has learned. A permanent rule mandating quick resolution of TRO cases was due to take effect Jan. 3, 2000.

TRO cases arise when firms sue departing brokers in an attempt to keep the reps from contacting customers. The proposed rule deals with the controversial practice of firms seeking restraining orders in court--and even partially litigating raiding cases in court--rather than through industry arbitrators.

The rule would have been a relief to brokers. Under the proposal, firms would be limited to 10-day court-ordered TROs. Further injunctive relief would have to be granted by an NASDR arbitrator, and arbitrators have historically been less willing than courts to interfere in the broker-client relationship.

Previously, the rule had been due to take effect at the start of 1999, but the two biggest users of court-ordered TROs, Merrill Lynch and American Express Financial Advisors, made last-minute objections in late 1998. In total, a decision on the expedited arbitration program has been postponed four times, and a permanent rule is two years overdue.

Linda Fienberg, the NASDR's executive vice president for dispute resolution, says an NASDR subcommittee has been working on a final rule, which will include "substantive changes from the prior [proposed] rule."

Fienberg declined to provide details. Industry legal observers are unsure what changes have been made.

The subcommittee is scheduled to present its new proposed rule to the NASDR's board on Dec. 9. If approved, it would be filed with the SEC and put out for public comment again, Fienberg says.

Fienberg declined to reveal the names of the members of the subcommittee, although several sources say there are six industry people on it. "I don't release [their names] to the press because the press will bother them, and then I won't be able to get people to serve on my subcommittees," she says.--Rosalyn Retkwa

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