Subject: File No. DF Title IX - Pre-Dispute Arbitration
From: Z. Jane Riley

August 23, 2010

RE: DF Title IX - Pre-Dispute Arbitration

To Whom It May Concern:

We feel the proposal to restrict the use of mandatory pre-dispute arbitration clauses would not be in the best interest of investors, the industry or regulators. Alternative Dispute Resolution has been rigorously encouraged by the legal community for several years. The arbitration system sets out all the procedures that must be followed by both sides, but arbitration allows the parties to customize the process to the cases needs. Arbitration allows flexibility in scheduling hearings, organizing the evidence and presenting testimony. The current FINRA arbitration system makes it easy and inexpensive for investors to file an arbitration claim. Even if customers have signed an arbitration agreement, they can request the arbitrators to allow the case to be heard in court. By contrast, filing a litigation claim is costly and time consuming for all concerned. In litigation, it is common for the parties to get bogged down in procedural issues that extend the time and cost of such proceedings. As with all costs of doing business, these additional expenses will eventually be passed on to the consumers and that will make it that more difficult for smaller investors to receive services.

We fear the restriction or prohibition on pre-dispute arbitration will increase the cost of litigation defense and errors and omissions insurance to the point it may become prohibitive and drive representatives and/or broker-dealers out of the business. If fewer broker dealers and fewer representatives are in the industry, it will be the small investors who will suffer the most.

FINRA has spent years working on the alternative dispute resolution system. The dollars and expertise that have gone in to this system should be used, not discarded.

Thank you for considering our comments against the restriction of pre-dispute arbitration clauses.


Z. Jane Riley, CSCP®
Chief Compliance Officer
The Leaders Group, Inc