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Mediation vs. Arbitration | The Mediator's Role | Who Are The Mediators? | Benefits Of Mediation | The Mediation Session | Negotiation Of Settlement | The Written Settlement

Securities Mediation and How it Differs from Securities Arbitration
Mediation is an informal, voluntary process in which an impartial person, trained in facilitation and negotiation techniques, helps the parties reach a mutually acceptable resolution. What distinguishes mediation from other forms of dispute.

Resolution (i.e. arbitration and litigation) is that the mediator does not impose a solution but rather works with the parties to create their own solution. Mediated solutions often include relief not available in arbitration or litigation.

Mediation is flexible and creative. The actual process varies from case to case depending largely on the parties' needs and the mediator's style. Usually, the parties meet to discuss the issues face-to-face. The mediator helps the discussions remains focused and productive. The mediator may hold private caucuses with each party separately, and will carry messages (clarifications, questions, proposals, offers, and counter offers) back and forth between them. The mediator uses the private caucus and other techniques to facilitate the negotiation.

Securities mediation is non-binding. The emphasis is on fashioning a solution satisfactory to all. However, if the parties cannot negotiate an acceptable settlement, they may still benefit from the process by narrowing the issues to be arbitrated or litigated.

The Mediator's Role
The mediator assists and guides the parties toward their own solution by helping them to define the important issues and understand each other's interests. The mediator focuses each side on the crucial factors necessary for settlement and on the consequences of not settling. The mediator does not decide the outcome of the case and cannot compel the parties to settle.

The mediator can defuse hostile attitudes and remedy miscommunications. The mediator is a mirror of reality, who can help soften or eliminate extreme negotiating positions. Through the mediator, parties assess weaknesses in their own case and recognize potential strengths of the other side. The parties can more clearly view matters previously distorted by anger and emotion.

Securities mediators are knowledgeable in the subject matter of the controversies. Within the privacy of the caucus, mediators can help each party analyze the strengths and weaknesses of its complete case. Most significantly, the mediator can explore creative and innovative solutions that the parties--caught up in adversarial negotiations--might never contemplate.

Who Are The Mediators?
Mediators are independent neutrals, not employees of the SROs. They are carefully screened and represent a cross-section of people, diverse in culture, profession, and background. Many have extensive knowledge of securities law and industry practices.

Many Mediators are also Arbitrators with training and experience in resolving securities matters. However, the skills required for each role are unique, and the two neutral pools are separate and distinct. To qualify as a securities mediator, an individual must submit four letters of reference from parties who have observed the applicant's mediation technique. Formal mediator training and experience as a mediator are additional requirements of service.

All parties must agree to the selection before a mediator is assigned to a case. Either side can stop the mediation process if dissatisfied with the mediator.

Benefits Of Mediation
Mediation belongs to the parties. The disputing parties control the process, scheduling, costs, and outcome of the dispute. The mediation process is informal; it is less confrontational than arbitration or litigation. The parties can enter into mediation without jeopardizing their ability to arbitrate or litigate, however most mediations are successfully concluded in a single day. Since mediation can be scheduled soon after a dispute arises, parties reach settlement much earlier than in arbitration or litigation. Many mediations conclude before a formal arbitration claim is filed.

Mediation usually entails lower legal and preparatory costs, there is minimal interruption of business or personal life, lost productivity is kept to a minimum, and the fees and expenses of mediation are modest.

The Mediation Session
A mediation typically consists of a joint session involving all participants as well as separate private sessions between the mediator and each party. Before the start of the mediation, most mediators require parties to sign an Agreement to Mediate and deposit the estimated fees.

The joint session may start with an opening statement by the mediator. The mediator explains the framework of the session, encourages active participation, and reminds all parties of the shared goal of resolving the conflict and of the confidentiality of the settlement negotiations. In the joint session, the mediator gives each party the opportunity to make a presentation and asks for a commitment by all participants to work hard toward resolution.

Party presentations generally address facts, liability, and damages, as well as background information, key issues, and needs. The tone is one of respectful communication. Each presentation is directed to the mediator and to the other side. Participants do not provide sworn testimony and are not subject to cross- examination. At the conclusion of the presentations, the mediator may ask clarifying questions.

The second stage of the mediation may then involve meetings, or "caucuses," held by the mediator privately and separately with each party. Caucuses are confidential so that each party can be open and candid about the case. Only if a participant grants permission will the mediator reveal information disclosed in these private sessions. This gives the mediator the opportunity to help the parties examine strengths and weaknesses of the case, analyze risks objectively, and develop options for resolution. The mediator explores each party's needs and underlying interests in resolving the dispute. Through a series of caucuses, the mediator can compare settlement expectations, facilitate the exchange of settlement offers, and help the parties reach common ground.

It is critical to the success of any mediation process that all individuals with authority to resolve the dispute attend the mediation session. The failure to bring parties or representatives with authority to settle will hamper the efficiency of mediation.

Neither the parties nor the mediator may disclose anything said during the mediation in any other proceeding, unless authorized by all other parties or compelled by law. No verbatim or other record is made of mediation sessions.

Negotiation Of Settlement
Throughout the mediation process, the mediator will help the parties negotiate effectively. Efforts to reach a settlement through mediation will continue until: (a) the parties agree to a resolution and execute a written settlement; (b) the parties conclude that further efforts to mediate the dispute would be futile and declare the negotiations at an impasse; or (c) any party or the mediator withdraws from the mediation process for any reason.

The Written Settlement
When a mutually acceptable resolution is reached, the parties will draft a document detailing all terms of the settlement. Parties save time and expense by signing a memorandum of understanding of essential terms at the close of the mediation. When all parties agree to its terms, the parties sign and execute the written settlement. Once the settlement agreement is signed, it is final and binding on the parties.

Most parties express satisfaction with the mediation process even when they do not reach full settlement. Proper preparation for the mediation session readies the parties for the arbitration. During the mediation process the parties and their representatives gain a better understanding of their case, which helps them focus on the next steps. Further, the mediation process moves very quickly and does not delay the ultimate resolution. The improved lines of communication often place the parties in a better position to settle the case at a later stage.

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