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Arbitration, Challenging a Decision, SEC Role

March 8, 2013

The SEC cannot act on behalf of individual investors in any arbitration proceeding and cannot overturn or change an arbitrator's decision. In addition, arbitration decisions are not subject to appeal. Although you cannot file an appeal of an arbitration decision, you can file a motion to vacate, which essentially asks the court to “cancel” the decision. However, the circumstances under which state or federal courts can grant the motion are typically very limited. For more information, please go to the Federal Arbitration Act and click on §10.

If you decide to challenge an arbitration decision in federal court, the Federal Arbitration Act requires you to act quickly: you must file a motion to vacate within three months of the date the arbitrator filed or delivered the decision. Some states may have arbitration statutes that require you to file the motion in even less time.

Although the SEC cannot help individual investors with challenging an arbitration decision, we appreciate hearing your concerns about the fairness and efficiency of the arbitration process. We oversee the arbitration programs conducted by self-regulatory organizations, such as FINRA Dispute Resolution. Your views can help us make sure that the process runs more smoothly and fairly. Please visit our Complaint Center to send us your feedback.

Broker-dealers cannot use confidentiality provisions to prohibit or restrict an individual from communicating with the Commission, FINRA, or other securities regulators.  More specifically, FINRA Rule 2010 (Standards of Commercial Honor and Principles of Trade) prohibits broker-dealers from using confidentiality provisions in settlement agreements, discovery stipulations in arbitration proceedings, or any other documents that prohibit or restrict a customer or any other person from communicating with the Commission, FINRA, or any federal or state regulatory authority regarding a possible securities law violation.

The Office of Investor Education and Advocacy has provided this information as a service to investors. It is neither a legal interpretation nor a statement of SEC policy. If you have questions conce
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