February 12, 1996

Mr. David Ruder

Arbitration Policy Task Force

C/O NASD

1735 K Street NW

Washington, DC 20006-1500

RE: Securities Arbitration Reform

Dear Mr. Ruder,

I am in receipt of the Report and must state that I find it incredulous that the powers to be have yet to acknowledge the significant lack of broker, attorney and arbitrator knowledge of security application.

A mere statement that arbitrator training requires improvement with almost sole emphasis on the law misses (as the panel saw in my correspondence to Ms. Mascussi) the major reason for arbitrations- suitability. There is NO training at the broker level regarding security application for a client profile nor is there anything at the basic level for attorneys. Actually, there is patently little training on securities anyway in the licensing training requirements.

It is clearly evident that the emphasis for the report came from attorneys- where probably but a mere handful could definitively state the proper definition for diversification. Can you? Could any member of that panel? Having done arbitrations in the past, it is obvious that arbitrators, NASD personnel and, equally, attorneys and expert witnesses had- and have- negligible understanding of basic investment application. True, many had a reasonable- if not excellent- understanding of the law but were, for the most part, incapable of applying it appropriately because they did not know what should have been done.

Perhaps the task force, as attorneys and industry personnel, felt the deciding issue was that attorneys simply have the responsibility to present their perceived facts of the case to the panel- irrespective of proper application. Fine, but then don't bother with training. But if the NASD accepts training, why the continued focus on Motion Practice, Evidentiary Issues in Arbitration, Managing Multi Party Complex Arbitrations but yet NEVER requiring a review, for example, of step up in basis? If you don't know the application of step up in basis- applicable to many senior consumers- then you can do as much motion practice as you want and never decide the case properly. Since I have done classes for attorneys, insurance agents, security agents and consumers, I can assure you they do NOT understand that major element to investing- assuming they ever heard about basis to begin with. And, as stated in previous correspondence, other elements of investing such as correlation, beta, asset allocation, etc., are left untouched in training at all levels.

This is not to indicate in toto that the recommendations did not have merit. But the commentary regarding arbitrator recruitment and training was sophomoric and a sham on the consumer. Some of you should be ashamed.

I fully recognize that my comments, before and now, will have a negligible impact on the knowledge and integrity of the industry. But at least someone told the truth.

Errold F. Moody Jr.

CC: John Hardiman

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