Research Handbook on Securities Regulation in the United States
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Research Handbook on Securities Regulation in the United States

Edited by Jerry Markham and Rigers Gjyshi

This fascinating Handbook provides a clear explanation of the securities market regulation regime in the United States. A diverse set of contributors offer a comprehensive overview of the regulatory process, Dodd-Frank, the principal securities statutes, and the regulators and market participants involved. In addition to a general summary of the topic, this volume provides detailed explanations of the process for registering securities, exemptions from registration, secondary distributions, and the underwriting process. Scholars and students of financial law, banking and regulatory law will find this book a useful resource, as will attorneys, compliance professionals, risk-mitigation professionals and corporate leaders.
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Chapter 14: The past, present and future of securities arbitration between customers and brokerage firms

Barbara Black


The Financial Industry Regulatory Authority (“FINRA”) is, for all practical purposes, the sole arbitration forum for resolving disputes between broker-dealers, associated persons and their customers. FINRA requires arbitration of disputes between customers and broker-dealer firms and associated persons at the request of the customer. The dispute must arise in connection with the business activities of the member or the associated person (except disputes involving the insurance business activities of a member that is also an insurance company). FINRA Rule 12100(i) defines a customer to exclude a broker or a dealer. Recent litigation has provided more content to the definition. In addition, a written agreement can require arbitration of customers’ disputes. Although some securities firms included predispute arbitration agreements (“PDAAs”) in customers’ brokerage agreements at least since the 1950s,modern securities arbitration began with the 1987 U.S. Supreme Court opinion, Shearson/American Express Inc. v. McMahon, which held that brokerage firms could enforce PDAAs and require customers to arbitrate their claims arising under federal securities law. Since that pivotal decision, virtually all broker-dealers require their customers to execute PDAAs. FINRA has hearing locations in every state, the District of Columbia, Puerto Rico, and London. From 2002 through 2012, the number of arbitration cases filed in its forum ranged from a high of 8945 (2003) to a low of 3238 (2007). From 2008 through 2012, the percentage and number of cases that resulted in an award where claimants were awarded damages ranged from 42 percent (199 cases) in 2008 to 47 percent (415 cases) in 2010.

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