For literally decades we’ve made recommendations for securities arbitration reform and lobbied strenuously for:

• the end to mandatory securities arbitration,

• the formation of an alternative to self-regulatory organization (SRO) arbitration that’s fair for public investors and outside of the brokerage industry, and

• the end to the appointment of so-called “industry arbitrators” to hear customer cases.

Confirming what we and others have been hearing from investors for years, an independent Study just released today by its authors and by the Chair of the Securities Industry Conference on Arbitration (SICA, chaired by Professor Constantine Katsoris of Fordham University School of Law) demonstrates that most customers of the brokerage industry believe SRO securities arbitration is unfair. This important study, “Perceptions of Fairness of Securities Arbitration: An Empirical Study,” was commissioned by SICA and authored by Professor Jill I. Gross of Pace University School of Law and Professor Barbara Black of Cincinnati School of Law, with the assistance of Yasamin Miller, Director of Cornell University’s Survey Research Institute (SRI). Ted Eppenstein of our Firm, Eppenstein and Eppenstein, is a Public Member of SICA, the committee that initiated the Study.

The North American Securities Administrators Association (NASAA) has already commented on the Study on its Web site, in a news release titled “State Securities Regulators Say New Study Clearly Shows Investors View Securities Arbitration as Biased and Unfair.” The states’ regulators are calling for “immediate action to improve the fairness of the system of securities arbitration, beginning with the removal of the mandatory industry representative from arbitration panels used to resolve securities disputes involving customers and industry.”

Bryan Lantagne, Director of the Massachusetts Securities Division and chair of NASAA’s Arbitration Project Group applauded the study:

“The study is sound and accurate. . . . The study’s responses were compiled in a scientific manner, which provided a factual foundation for its results.”

Karen Tyler, North Dakota Securities Commissioner and President of NASAA said that:

“where there is no choice but arbitration through a program administered by FINRA, then investors must have confidence in the substantive fairness of the process. . . .”

We’ll have more to say about the Study in the next postings. For now, use these links to read more about our recommendations and congressional testimony over the years to improve the securities arbitration process for investors.