ARBITRATION IN THE CORPORATE WORLD
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This research paper discusses the use of arbitration to resolve disputes involving corporations, especially those between investors and retail securities brokerage firms, in the United States. Arbitration developed slowly in the 20th century in common law jurisdictions as a cost effective alternative to litigation in the courts as the courts overcame their traditional reluctance to accept arbitration and to recognize the enforceability of private pre-dispute arbitration agreements (PDAAs). Because of the congestion in the civil courts and for other reasons, arbitration in a number of forms is very much in vogue in a variety of contexts. In the securities industry, arbitration has emerged since the mid to late 1980s as the principal vehicle for resolving disputes involving investors and securities brokerage firms. Today, a number of issues face the parties involved in the arbitration of securities-related disputes, including private investors seeking redress for alleged wrongdoing by brokerage firms, the self-regulating industry associations (SROS) under whose auspices such disputes are arbitrated, the Securities and Exchange Commission (SEC) and federal and state courts, as they attempt to achieve a proper balance between the interests of the investing public and the industry and to improve the effectiveness and fairness of securities arbitrations. Overall, the present system of securities arbitration appears to be working fairly well.
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r the investor, given his disclosures concerning his investment objectives and his financial circumstances. In states which do not or may not recognize suitability claims as causes of action, a claim for breach of the broker's fiduciary duty to the investor is sometimes added. Negligence claims are also commonly asserted.
Remedies sought by investors are damages, interest accruing from the time the alleged misconduct of the broker occurred and the recovery of the investor's attorneys' fees. Damages claimed may include a claim for the profits lost by the investor as a result of the alleged misconduct of the broker and/or losses which were the proximate and reasonably foreseeable result of that misconduct. In cases involving fraud, misrepresentation and other forms of wilful and intentional misconduct, claims may be made for punitive damages (discussed below).
The current issues involved in securities arbitration can best be understood if one first understands how the law in this area, primarily federal law, has evolved.
Landmark Supreme Court Cases on Enforceability of PDAAs in
Investor/Broker Disputes
In Wilko v. Swan, 346 U. S. 427 (1953), the Supreme Court held that the right to go to court to enforce claims under the
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Some common words found in the essay are:
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Approximate Word count = 7356
Approximate Pages = 29 (250 words per page)
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