August 24, 2010
I am an attorney who frequently advocates in arbitrations through various organizations not just FINRA. The comments I have read seem to argue either that there should not be mandatory pre-dispute securities arbitration clauses because the present system is unfair or that there should be mandatory pre-dispute arbitration clauses because the system is so good. Based on my experience of what is and is not effective in other arbitration forums, I can say that the current FINRA system is as flawed as an arbitration forum can be. But that is not the issue.
The current system can be changed, so how bad it is now or how good some perceive it to be are both temporary arguments. The question is how can the SEC best protect investors and provide a truly fair arbitration system that is not subject to gaming for advantage in the rule setting process.
The answer is to make arbitration optional. Consumer choice is the only effective way to ensure fairness. Let the market decide. If the system truly protects consumers, is fair, and is more efficient than other forums, then customers will choose it. Otherwise, they will not.