Washington Business Daily

Does any investment broker not require signing an arbitration clause?

My broker is merging with a foreign company. I would like to move my money to a domestic broker and also find a broker that does not require using arbitration in the event of a dispute. I am not anticipating legal action but I do not want to sign away any of my avenues of recourse.

Public Comments

1. I do not know of a US broker without an arbitration clause. Here's some history: "Until 1987, defrauded investors could choose to go to court and have a judge and jury decide their federal statutory claims under the U.S. securities laws. In the likely event that the defendant broker-dealer was a member of an SRO, such as the NYSE or the National Association of Securities Dealers, Inc., (“NASD”), claims in arbitration could be asserted upon the demand of the public customer, and access to the arbitral forum could be based on the membership provisions of those organizations even in the absence of an arbitration agreement. Overwhelmingly though, the choice for public customers was to go to court. But choice of forum was abrogated in 1987 by the Supreme Court in the seminal case of Shearson/American Express, Inc. v. McMahon. In that case, in which the author’s firm represented the investors, the Supreme Court, by a close 5-4 vote, enforced the arbitration clause in a customer agreement pursuant to the Federal Arbitration Act (“FAA”), despite historical aversion by both the courts and the Securities and Exchange Commission (“SEC”) to the arbitration of securities fraud disputes. Since then, the caseload in arbitration has steadily increased. In 2000, for example, there were approximately 5,725 cases filed at the NASD, with a record 7,088 new claims filed in 2001. The NYSE, which historically has maintained a smaller caseload, had 780 filings in 2001."