The Historical Basis of Securities Arbitration as an Investor Protection Mechanism Symposium

This article describes a history of securities arbitration, and uncovers the original purpose of designating arbitration to resolve investor disputes. This article argues that both investors and the industry have disregarded this underlying purpose, causing them to view securities arbitration through a distrusting, critical lens. Rather than cynically viewing securities arbitration as a forum created by and favoring industry players, investors should view arbitration as a central and critical component in a system of investor protection. Likewise, rather than promoting mandatory arbitration as desirable because of its speed and economies, broker-dealers and SIFMA should advertise the investor-protective benefits of the process.

By reframing modern securities arbitration as an investor protection device, both industry and investors’ advocates can work within the system to improve it rather than fight to tear it down.