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San Francisco-The California 2d District Court of Appeal has dealt a major blow to the state’s tough new ethical rules for securities arbitrators, deciding that federal law pre-empts the state Legislature’s ability to set such standards. Jevne v. the Superior Court of Los Angeles, No. B167044, is the first published California appellate court ruling on the controversial ethical rules to decide the issue of pre-emption. “Despite the laudable goals of the Legislature in promulgating the California Standards to protect consumers and maintain judicial scrutiny of securities arbitrations, the disqualification rules . . . present a clear physical conflict with the [National Association of Securities Dealers] rules,” wrote Justice Laurie Zelon. The rules require that arbitrators disclose financial relationships or other conflicts of interest between themselves and parties in disputes. It’s unknown if the consumer who lost the case will appeal the decision.

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