According to a recent survey by the Securities Industry Conference on Arbitration (SICA), participants in the NASD and NYSE arbitrations overwhelming felt they were unfair and were dissatisfied with the outcome. The North American Securities Administrators Association offers a glimpse into why–
Currently, almost every broker-dealer includes in their customer agreements a predispute arbitration provision that forces public investors to submit all disputes that they may have with the firm and/or its associates to mandatory arbitration. Securities arbitration cases are heard by a three-member panel that includes one “non-public” or securities industry member, and two “public” members, who may have worked in the industry. Neither of the public arbitrators is required to be an investor advocate, even though the non-public arbitrator is required to be an industry representative.
It’s no wonder that many investors could feel "trapped."
Some interesting numbers:
- Nearly half of the customers who expressed their views believed their arbitration panel was biased;
- 62 percent believed the arbitration process was unfair;
- 70 percent were dissatisfied with the outcome;
- 49 percent stated that the arbitration process was too expensive, and;
- A striking 75 percent of customers who compared their arbitration process to their civil litigation process indicated that arbitration was “very unfair” or “somewhat unfair” compared to court.
Download the full report.