Mass. Securities Regulator Urges SEC to Reduce Mandatory Arbitration
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The 2010 Dodd-Frank Act empowered the SEC to study the use of mandatory arbitration in the securities industry and consider whether to ban regulated firms from imposing mandatory arbitration on customers. To date, the SEC has not launched any such study, presumably because Dodd-Frank was loaded with so many regulatory mandates to the SEC that the agency has not had time or the resources to pursue non-mandatory rule-making.
Both broker-dealers (B-Ds) and investment advisers (IAs) – financial services entities that are regulated differently (the SEC and FINRA regulate B-Ds; the SEC and state securities commissioners regulate IAs) — are known to include pre-dispute arbitration clauses in their customer agreements. In fact, it is widely known that virtually all B-Ds include mandatory arbitration clauses in their customer agreements, a fact that has led many to argue that this is unfair to investors, in light of the lack of choice. A study conducted recently by the Massachusetts Securities Division found that about half of the IAs in the state included such a PDAA.
Read original articleTags: Mandatory Arbitration, SEC
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