What is securities arbitration?
By: LawInfo
In 1987, the U.S. Supreme Court held that brokerage firms could enforce predispute arbitration clauses contained in their standard form customer agreements. Virtually all brokerage firms' customer agreement forms now contain arbitration clauses. As a result, most disputes between brokerage firms and customers are arbitrated. Arbitration is a private dispute resolution process in which three arbitrators are appointed to decide the merits of a case. One of the arbitrators is required to be associated, presently or formerly, with an NASD member. The purpose of having an "industry representative" on the panel is to assure that the panel will have the expertise and experience necessary to understand the transactions and practices involved in the case. The other two panel members are typically businesspersons, such as lawyers, accountants, investors or retired judges, who have an interest in securities or dispute resolution. In arbitration, the parties are typically represented by counsel and present evidence through testimony and documents like in a court proceeding. A significant except to mandatory arbitration exists for class action claims.
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