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GAO-01-162R 1 (2000-11-09)

handle is hein.gao/gaobaalrg0001 and id is 1 raw text is: r-G A 0 Accountability * Integrity * Reliability United States General Accounting Office Washington, D.C. 20548 November 9, 2000 The Honorable John D. Dingell Ranking Minority Member Committee on Commerce House of Representatives Dear Mr. Dingell: Subject: Procedures for Updating Arbitrator Disclosure Information This report responds to your March 23, 2000, request that we evaluate the effectiveness of the National Association of Securities Dealers' (NASD) subsidiary, NASD Dispute Resolution, Inc. (NASD-DR), procedures for updating biographical information that its arbitrators submit.' You specifically cited an incident in which NASD-DR staff did not enter updated information on the employment status of one arbitrator into its arbitrator disclosure information database. This resulted in the parties in arbitration not receiving the updated information until after their case had begun. You expressed concern about whether NASD-DR had implemented a procedure to ensure prompt updating of this database that would prevent recurrences of this type of incident. Results in Brief Late in 1998, NASD-DR began to improve the way it handles the background information updates that its arbitrators submit. It assigned responsibility for entering this information into its arbitrator disclosure information database to specific staff members in each of its offices, required that the data be entered within 3 days of receipt, and conducted random spot-checks of the data entered. Although these changes reduced the potential for untimely or inaccurate data entry, they could not ensure that all data submitted by about 7,000 arbitrators to any of NASD-DR's offices by mail, telephone, or e-mail would be entered in a timely and accurate manner. To further reduce the potential for error, NASD-DR plans, beginning late in 2000, to (1) introduce a form that will allow arbitrators to submit update information electronically and (2) centralize processing of the information in its Department of Neutral Management, the unit responsible for administering arbitrator training and selection activities. Since NASD- DR has made improvements and plans to initiate additional improvements to its procedures for updating arbitrator disclosure information, we are not making any further recommendations at this time. In July 2000, NASD-DR became operational as a subsidiary of NASD. NASD-DR administers NASD arbitration, mediation, and other alternative dispute resolution services. GAO-01-162R Arbitrator Disclosure Information Page I

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