NASAA: End Mandatory Arbitration

By Compliance Reporter,

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  David Massey

State regulators have urged the Securities and Exchange Commission to give aggrieved clients of brokerage firms the choice between arbitration and litigation. David Massey , president of the North American Securities Administrators Association and deputy administrator with the securities division of the North Carolina Department of the Secretary of State , told CR that giving investors the choice of where to press their claim would enable customers to “have their day in court” on issues that may be too complex for arbitration.

The Dodd-Frank Act empowered the Securities and Exchange Commission to limit or prohibit mandatory pre-dispute arbitration clauses in broker/dealer accounts. B/Ds fear that doing so would, among other things, cause costs to rocket, encourage frivolous claims and lengthen the dispute process for both firms and investors (, 10/1 ).

Massey argued that only investors were hurt by not having the option to pursue litigation against brokerages, particularly in complex cases. “What’s the downside of the investor having the election, depending on the complexity of the issue, between arbitration and litigation?” he added.

--Jake Simpson

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Copyright © 2010 Institutional Investor

This article appears in: Financial Advisor Center Business
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