SACRAMENTO — Two California state senators filed a formal complaint against the New York Stock Exchange and the National Association of Securities Dealers on Thursday, saying the two groups are stalling arbitration claims of California investors.
Sens. John Burton and Martha Escutia said in a letter to Securities and Exchange Commission Chairman Harvey Pitt that the NYSE and NASD have delayed those proceedings as retaliation for California’s tougher ethics standards for arbitrators.
The NYSE and the NASD have refused to proceed with new arbitration cases of investor claims in California since July 1, when the new ethics policies were enacted, said Burton, D-San Francisco, and Escutia, D-Commerce.
The lawmakers said the delay was an “illegal and a misguided retaliatory action against the California Judicial Council’s new arbitrator ethics standards requiring disclosures of conflicts of interest.”
Brokerage contracts generally require that investor complaints be handled through arbitration, and the NASD, which regulates brokerage firms, handles roughly 90 percent of cases that go through that process, said NASD spokesman Mike Shokouhi. The NYSE also handles arbitration cases.
The NASD “appreciates Sen. Escutia’s concerns and will continue to talk with her, as we have done in the past,” said spokeswoman Nancy Condon.
Both groups sued the California Judicial Council over its new ethics standards, saying the new standards shouldn’t apply in securities disputes.