Corporate Governance

How the Wall Street Reform Act Impacts Smaller Businesses: Changes to Pre-Dispute Arbitration?

By J Robert Brown Jr.

Since Wilko v. Swan40 (relating to the 1933 Act) and Shearson/Am. Express Inc. v. McMahon41 (relating to the 1934 Act), pre-dispute arbitration agreements in securities matters have unquestionably been enforceable, and most (if not all) agreements between broker-dealers and their customers contain mandatory arbitration provisions.42 In Peterson v. Beale,43 a brokerage client was required to arbitrate the claims even though the customer agreement was signed by his broker on the customer's behalf (not by the customer). Section 921 of the Act gives authority to the SEC to 'prohibit, or impose conditions or limitations on the use of' predispute arbitration agreements involving any broker, dealer, municipal securities dealer, or investment adviser.44

Herrick K. Lidstone, Jr., Burns Figa & Will, PC

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40 346 U.S. 427, 74 S. Ct. 182, 98 L. Ed. 168 (1953).
41 482 U.S. 220, 107 S. Ct. 2332, 96 L. Ed. 2d 185 (1987).
42 See general discussion in Lidstone, Securities Law Deskbook (Bradford Publishing Co.) at §§ 14.2-14.3.
43 Fed. Sec. L. Rep. (CCH) ¶ 98,980, 1995 WL 479425 (S.D.N.Y. 1995).
44 Adding § 15(o) to the 1934 Act and § 205(f) to the Advisers Act.?

Full post as published by The Race to the Bottom on July 29, 2010 (boomark / email).