Securities Law Commons^™

Can Behavioral Economics Inform Our Understanding Of Securities Arbitration, Barbara Black

Faculty Articles and Other Publications

This paper contributes to the ongoing debate over FINRA arbitration by invoking behavioral economics principles to understand why PDAAs in securities arbitration continue to resist powerful market and political forces calling for their elimination.

Part II of the paper sets forth background information to put the issue in context. It first describes several important distinctions between securities arbitration and other forms of consumer arbitration. It next summarizes pertinent economic theory, first classical economic theory in support of PDAAs and then behavioral economics principles that challenge the classical approach.

Part III poses three questions regarding the staying power of PDAAs and …

Is Securities Arbitration Fair To Investors?, Barbara Black

Faculty Articles and Other Publications

Most disputes between customers and their brokerage firms are resolved through arbitration as a result of the Supreme Court's holding in Shearson/American Express, Inc. v. McMahon. McMahon was part of two larger trends of the Supreme Court: the Court's general pro-arbitration trend and its efforts to remove private securities fraud claims from federal court. Many investor advocates viewed McMahon as anti-investor, a view that continues to have support today.

This is an assessment of the current securities arbitration process from the perspective of an investor advocate. In my view, investors may fare better in arbitration than in litigation. Accordingly, the …