Arbitration of Securities Claims: Policy Considerations for Keeping Investor-Broker Disputes Out of Court

Thursday, January 1st, 1987 at 12:00 am by Deborah B. Oliver
Deborah B. Oliver, Arbitration of Securities Claims: Policy Considerations for Keeping Investor-Broker Disputes Out of Court, 1987 Colum. Bus. L. Rev. 527

Each year thousands of legal disputes arise between securities investors and brokers. To handle the myriad of claims, an industry-sponsored system of arbitration has developed. Not only is the system practical and economical, but it is approved by the Securities and Exchange Commission (‘SEC’) and is subject to SEC oversight. Nevertheless, the federal courts have recently divided in response to brokers’ requests for enforcement of arbitration clauses in securities disputes. The primary conflict lies between the federal policy favoring the enforcement of arbitration agreements, as manifested in the Federal Arbitration Act (‘Arbitration Act’), and the policy of investor protection that Congress infused into the federal securities laws. The courts have been reluctant to entrust the matter of investor protection to any non-judicial body, notwithstanding the recent expansive interpretation given the Arbitration Act. With thousands of disgruntled securities customers waiting in the wings, the fight in the courts has escalated to the point where the Supreme Court has agreed to resolve the issue.

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