[Federal Register Volume 63, Number 154 (Tuesday, August 11, 1998)]
[Notices]
[Pages 42891-42892]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-21476]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-40306]


Alternative Dispute Resolution Policy Statement

AGENCY: Securities and Exchange Commission.

ACTION: Final statement of policy.

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SUMMARY: Consistent with the Administrative Dispute Resolution Act of 
1996, the recommendations of the National Performance Review, and 
Executive Order 12988, the Securities and Exchange Commission has 
adopted this Final Statement of Policy on the use of alternative 
dispute resolution (ADR) techniques to resolve appropriate disputes in 
a fair, timely, and cost efficient manner.

EFFECTIVE DATE: August 11, 1998.

FOR FURTHER INFORMATION CONTACT: D. Leah Meltzer, Senior ADR 
Specialist, Office of General Counsel, Securities and Exchange 
Commission, 450 Fifth Street, NW, Mail Stop 6-6, Washington, DC 20549, 
telephone (202) 942-0048; e-mail [email protected].

SUPPLEMENTARY INFORMATION:

Background

    On January 29, 1993, in response to the Administrative Dispute 
Resolution Act of 1990, the Commission published a notice in the 
Federal Register inviting interested persons to submit comments on the 
utility of application of ADR procedures in Commission programs and 
activities to assist the Commission in its effort to develop 
appropriate policies. All nine comments received related to the 
Commission's enforcement program and were considered in developing the 
Commission's final Statement of Policy.

Statement of Policy on Alternative Dispute Resolution

    ADR is the resolution of disputes through informal, voluntary, 
consensual techniques such as mediation, early neutral evaluation, 
minitrials, the practice of ombuds, arbitration and other methods. The 
Commission is committed to the use of ADR as a management tool to 
resolve disputes at an early stage, in an expeditious, cost effective, 
and mutually acceptable manner. The Commission adopts this policy to 
express its full support for the appropriate use of ADR. This policy is 
intended to apply to the resolution of disputes in contract 
administration, disputes in litigation (except as noted below), and 
internal disputes, such as those between employees and management. It 
is not intended to apply to inspections and law enforcement 
investigations. In addition, a number of factors make litigation 
challenging enforcement of the federal securities laws generally 
unsuitable for ADR techniques (i.e., the need to ensure that the law 
enforcement function is not compromised, the need to ensure uniform 
treatment, and the need for judicial resolution or precedent). This 
policy is also not intended to apply to situations where the Commission 
seeks a temporary retraining order.

Core Principles Governing the Commission's Use of ADR

    Any use of ADR by the Commission will be governed by certain core 
principles. Foremost, any Commission ADR program must further the 
agency's mission of administering the federal securities laws and 
protecting investors. While the Commission will consider ADR in any 
dispute in which a negotiated solution is a potentially acceptable 
outcome, the Commission believes that not every dispute is suitable for 
settlement through ADR. Further, while ADR processes are an important 
option in the Commission's ability to resolve disputes, we believe the 
processes are supplementary to, not a displacement of, traditional 
adjudicative methods of resolving disputes. Therefore, the Commission 
will engage in ADR only after determining that ADR is appropriate in a 
particular instance. Moreover, the Commission recognizes that its ADR 
policies and programs must be flexible enough to respond to the 
diversity of disputes that the Commission handles, the evolving court-
based ADR programs, and on-going statutory changes and programmatic 
concerns. To that end, the Commission believes that its ADR policy 
should be dynamic and continually developing.

Affirmative Steps To Promote the Use of ADR

    In furtherance of its commitment to ADR, the Commission has taken 
and will continue to take several affirmative steps to promote the use 
of ADR. The Administrative Dispute Resolution Act requires that each 
agency appoint an agency Dispute Resolution Specialist. The Commission 
has appointed the General Counsel as the agency Dispute Resolution 
Specialist. The senior ADR specialist serves as the Deputy Dispute 
Resolution Specialist. The Dispute Resolution Specialist is authorized 
to develop dispute resolution policy and procedures; consult with the 
staff on individual disputes regarding the appropriate use of ADR; 
develop conflict management and prevention programs; monitor 
implementation and evaluate dispute resolution program execution and 
results; determine appropriate ADR-related training within the 
Commission to educate employees and disputants about ADR and conflict 
management options and processes; provide for access to neutral third 
parties; and assure that incentives are developed which reward the 
appropriate use of ADR.

Training

    The Commission has begun and will continue to provide ADR training 
to managers, supervisors and other individuals identified as benefiting 
from the training, so that they will understand the appropriate use of 
ADR,

[[Page 42892]]

its potential benefits, and how to obtain assistance. The Commission 
will, as appropriate, also provide certain employees, including 
litigation and contract attorneys, with training in ADR advocacy 
techniques.

Confidentiality of ADR Processes

    The Commission recognizes that the successful use of ADR procedures 
is dependent on reasonable assurances of confidentiality to protect the 
process. This principle is recognized and implemented by provisions of 
the ADR Act. Accordingly, in connection with the ADR policy adopted 
herein, the Commission adopts a policy of confidentiality consistent 
with provisions of the ADR Act. In addition, the Commission, except as 
it pertains to the Office of the Inspector General, agrees not to issue 
process against any participant in an ADR proceeding, including any 
neutral utilized by these ADR procedures, or to obtain information or 
documents received by the participants in connection with such 
proceedings. The Commission also directs that members of the staff, who 
may receive information or documents in connection with any matter 
submitted to ADR, not disclose such information and documents under any 
circumstances inconsistent with the confidentiality provisions set 
forth in Section 574 of the 1996 ADR Act. Section 574 provides that, 
except in certain limited situations, neither a neutral nor the parties 
to a dispute may voluntarily disclose or through compulsory process be 
required to disclose any oral or written communication prepared for the 
purpose of a dispute resolution proceeding. To the extent disclosure is 
permitted pursuant to an exception in Section 574, members of the staff 
may not disclose or use such information or documents for any purpose 
other than in connection with one's official duties or 
responsibilities. Violation of this policy may result in disciplinary 
action. This policy of confidentiality does not prevent the discovery 
or admissibility of otherwise discoverable evidence in any 
administrative or judicial forum merely because the evidence is 
presented in a proceeding utilizing ADR procedures.

Implementation

    It is the responsibility of all Commission employees to implement 
this policy and to practice and promote cost-effective dispute 
resolution in Commission programs and other areas of Commission 
operation. All management and employees of the Commission are hereby 
directed to take the necessary steps to implement this policy and to 
cooperate to the fullest extent with the Dispute Resolution Specialist 
and his/her designee to promote effective and appropriate use of ADR at 
the Commission in furtherance of this policy. The determination to use 
ADR in any particular instance rests with the head of the Division or 
Office involved.
    This policy statement is intended only to improve the internal 
management of the Commission in resolving disputes. It shall not be 
construed as creating any right or benefit, substantive or procedural, 
enforceable at law or in equity, by any person against the Commission 
or its employees. This policy statement shall not be construed to 
create any right to judicial review involving the compliance or 
noncompliance of the Commission or its employees with this statement. 
Nothing in this policy statement shall be construed to obligate the 
Commission to offer funds to settle any case, to accept a particular 
settlement or resolution of a dispute, to alter its standards for 
accepting settlements, to submit to binding arbitration, or to alter 
any existing delegation of settlement or litigating authority.

    Dated: August 5, 1998.

    By the Commission.
Jonathan G. Katz,
Secretary.
[FR Doc. 98-21476 Filed 8-10-98; 8:45 am]
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