Securities Law and Arbitration: Courts Uphold Validity of Predispute Arbitration Agreements in Spite of Securities Laws

Abstract

This article explores the alternative dispute resolution technique of arbitration as it is employed in securities disputes. Historically, such disputes have been resolved in judicial for a, but increasingly courts are compelled to turn over such case to arbitration association. In the typical scenario involving arbitration of securities disputes, the investor/customer loses money on an investment in publicly traded securities, and later brings an action in federal district court attempting to recoup losses. The brokerage house will then seek a stay of the litigation and an order compelling arbitration under the parties' predisputearbitration agreement. The article recommends increased Congressional and SEC oversight of these agreements to ensure fair results, because if arbitration is the exclusive remedy, there is a heavy responsibility to protect investors.