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The Quiet Revolution: Securities Arbitration Confronts the Hard Questions

Document Type

Article

Language

English (en)

Publication Date

1996

Publication Title

Houston Law Review

Abstract

In three decisions between 1985 and 1989, the United States Supreme Court established the principle that brokers and their customers may enter mandatory predispute agreements to arbitrate securities claims arising under state law, Rule 10b-5, The Racketeer Influenced and Corrupt Organizations Act (RICO), and section 12(2) of the Securities Act of 1933. The last of these decisions, Rodriguez de Quijas v. Shearson /American Express, Inc., expressly overruled the Supreme Court's 1953 decision in Wilko v. Swan, which had held that section 14 of the Securities Act of 1933 barred a mandatory broker-customer predispute arbitration agreement.

The practical effect of this triad of Supreme Court decisions was to revolutionize broker-customer dispute resolutions. In 1980, securities industry self-regulatory organizations (SROs) received a total of 830 arbitration proceedings. This figure grew eight-fold to a total of 6561 cases by 1993. While the Supreme Court established the principle that securities broker-customer claims generally may be subject to mandatory predispute agreement, the Court did not resolve the tough questions that followed in the wake of its revolution in broker-customer dispute resolution. These questions include: when should a customer's relinquishment of rights to litigate federal securities claims be binding, who should arbitrate securities customer claims, and what remedies should be available?

Keywords

Broker-Customer Dispute Resolutions, Mandatory Predispute Agreement, Arbitration

Publication Citation

Joel Seligman, The Quiet Revolution: Securities Arbitration Confronts the Hard Questions, 33 Hous. L. Rev. 327 (1996)

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