Investors Currently Must Resolve Disputes Through Arbitration
Consumer advocates, including leading politicians, have once again been beating the drum over reform in how various industries, including the securities industry, resolve customer disputes. Currently, nearly all major broker-dealers compel customers to sign binding arbitration agreements as part of their account opening documents. Many investors don’t know this, but signing these documents in effect deprives you of the right to bring any subsequent disputes with your broker or broker-dealer before a jury of your peers in a court of law.
While reformers want to get rid of these binding arbitration agreements because they are disadvantageous to customers and consumers, the industry will not let go of them easily. Indeed, their legal departments and strategies for dealing with customer disputes are set up entirely with arbitration in mind.
The Investors Choice Act Would Give Investors a Choice of Paths to Resolution
The Investor Choice Act, authored by Rep. Bill Foster (D-Ill.) seeks to bar not only broker-dealers but other corporations from deploying mandatory arbitration agreements. At a recent hearing, the Act met strong opposition from industry groups such as SIFMA as well as the Chamber of Commerce. Tom Quaadman, executive vice president with the Chamber of Commerce, defended the arbitration process as a vital dispute resolution tool that helps clients and advisors alike avoid lengthy and costly litigation.
That may be the case. While FINRA arbitration proceedings typical take about a year and a half to be resolved, cases that must make their way through the justice system could take up to several years to reach resolution. However, that isn’t the point that customer advocates are making. As the Investor Choice Act’s name suggests, this is all about giving the customers a CHOICE as to which avenue they would like to pursue — arbitration or a court of law. Right now, investors have no choice. They must take their disputes to arbitration.
Choosing an Attorney for Your Securities Claim
It remains to be seen how this challenge to entrenched power will play out. In the meantime, customers will continue to have to bring their disputes with stock brokers and broker-dealers through the established channel of the FINRA dispute resolution forum. Accordingly, any investor with a dispute would be best served to find an attorney who understands this challenging and specialized process and has experience with securities litigation.