Securities Law Commons^™

International Investment Agreements: Are Their Policy Aims Served By Their Broad Definitions Of Covered “Investors” And “Investments”?, Lise Johnson

Columbia Center on Sustainable Investment Staff Publications

With negotiation of “mega-treaties” such as the 12-country Trans-Pacific Partnership (TPP) and investment treaties between the EU and other large economies such as Canada and the United States, international investment agreements (IIAs) are gaining fame and raising a host of important policy questions. Among those questions are who/what the treaties benefit and at what cost.

The Influence Of Arbitrator Background And Representation On Arbitration Outcomes, Adam C. Pritchard, Stephen J. Choi, Jill E. Fisch

Articles

We study the role of arbitrator background in securities arbitration. We find that several aspects of arbitrator background are correlated with arbitration outcomes. Specifically, industry experience, prior experience as a regulator, and status as a professional or retired arbitrator are correlated with statistically significant differences in arbitration awards. The impact of these characteristics is affected by whether the arbitrator in question serves as the panel chair and by whether the parties to the arbitration are represented by counsel. Our findings offer some preliminary insights into the debate over possible arbitrator bias. On the one hand, they suggest that the party …

Arbitration Case Law Update 2014, Jill I. Gross

Elisabeth Haub School of Law Faculty Publications

This chapter identifies decisions by the U.S. Supreme Court, the Financial Industry Regulatory Authority (FINRA) and selected lower federal and state courts in the past year that interpret and apply the Federal Arbitration Act (FAA) and could have an impact on securities arbitration practice.

Opening The Floodgates Of Small Customer Claims In Finra Arbitration: Finra V. Charles Schwab & Co., Inc., Teresa J. Verges

Articles

No abstract provided.

The Improbable Birth And Conceivable Death Of The Securities Arbitration Clinic, Jill I. Gross

Elisabeth Haub School of Law Faculty Publications

This Article explores the birth, life, and possible death of securities arbitration clinics (SACs) in the United States. Part II of this Article describes the history of the securities arbitration clinic in the United States. Part III describes how a SAC operates and how SAC students help investors. Part IV reviews the pedagogical advantages and disadvantages of a SAC, and addresses the reluctance of many law schools to embrace this type of clinic. Part V concludes by predicting whether these clinics have a future in light of the modern challenges to clinical legal education.

Has Expungement Broken Brokercheck?, Christine Lazaro

Faculty Publications

Stockbrokers are subject to one of the most comprehensive public disclosure regimes. They must disclose substantial information about their backgrounds, their employment history, and their disciplinary history. FINRA, the self-regulatory organization that regulates the brokerage industry, also requires that brokers disclose customer complaints and makes much of this information available to the public through an online database called BrokerCheck. The allegations of wrongdoing remain on the broker’s record permanently, unless the broker succeeds at having customer dispute information expunged. The broker is able to accomplish this by requesting that the arbitration panel that hears the customer dispute grant expungement, and …

Arbitration Case Law Update 2013, Jill I. Gross

Elisabeth Haub School of Law Faculty Publications

The U.S. Supreme Court and lower state and federal courts continue to decide cases under the Federal Arbitration Act (FAA) at an astounding rate. This chapter summarizes Supreme Court opinions over the past year that interpret the FAA, as well as selected lower court decisions that apply the FAA and could have an impact on securities arbitration practice.

The Unjustified Furor Over Securities Arbitration, Gilbert R. Serota

Pepperdine Law Review

No abstract provided.

Protecting The Public, Not Anyone's Turf: The Unlicensed Practice Of Law In Securities Arbitration , John P. Cleary

Pepperdine Law Review

No abstract provided.

Arbitration Case Law Update 2012, Jill I. Gross

Elisabeth Haub School of Law Faculty Publications

Parties to arbitration agreements sometimes invoke the judicial system to litigate collateral issues arising out of the arbitration process, such as arbitrability of some or all of the claims, arbitrator bias, and award enforcement or vacatur. When deciding these collateral issues arising out of securities arbitration, courts interpret and apply the Federal Arbitration Act (FAA). This chapter identifies recent decisions by the Supreme Court under the FAA, as well as selected lower court decisions that could have an impact on securities arbitration practice.

Mexico And The Settlement Of Investment Disputes: Icsid As The Recommended Option, Bernardo Sepúlveda

Pepperdine Dispute Resolution Law Journal

The changes that have taken place in arbitration conditions, the greater fairness in the arbitration process, and the increasingly stringent qualifications to be met by arbitrators, as well as contemporary economic realities, have been instrumental in causing Mexico's about-face on its approach to arbitration. Although in certain quarters doubts remain in Mexico as to the advantages of international arbitration, it would be ill advised to ignore a legal and political reality. In signing treaties that include an arbitration clause, Mexico has assumed rights and obligations. Politically speaking, a border has already been crossed. In the face of this indisputable fact, …

Unraveling The Mystery Of Wilko V. Swan: American Arbitration Vacatur Law And The Accidental Demise Of Party Autonomy , James M. Gaitis

Pepperdine Dispute Resolution Law Journal

This article begins with a brief description of what the Wilko Court said with respect to the vacatur of arbitral awards and how federal and state appellate courts have construed that language. Traditional American arbitration vacatur law, including but not limited to the cases relied upon by the Wilko Court, are then reviewed in depth such that the Wilko decision and the Wilko Court's choice of language may be placed in context and fully examined. The intent and proper operation of the FAA are then discussed based on both the legislative history of the FAA and other authorities that consistently …

Arbitration Of Investors' Claims Against Issuers: An Idea Whose Time Has Come, Barbara Black

Faculty Articles and Other Publications

Ever since the U.S. Supreme Court held that arbitration provisions contained in brokerage customers’ agreements were enforceable with respect to federal securities claims, proposals have been floated to include in an issuer’s governance documents a provision that would require arbitration of investors’ claims against the issuer. To date, however, publicly traded domestic issuers and their counsel have not seriously pursued these proposals, probably because of several legal obstacles to implementation. In addition to these legal obstacles, publicly traded issuers may not have perceived significant advantages to arbitration. Recent legal developments, however, make inclusion of an arbitration provision in a publicly …

Investor Protection Meets The Federal Arbitration Act, Barbara Black

Faculty Articles and Other Publications

In the past three decades, most recently in AT&T Mobility LLC v. Concepcion, the United States Supreme Court has advanced an aggressive proarbitration campaign, transforming the Federal Arbitration Act (FAA) into a powerful source of anti-consumer substantive arbitration law. In the aftermath of AT&T Mobility, which upheld a prohibition on class actions in a consumer contract despite state law that refused to enforce such provisions on unconscionability grounds, efforts have been made to prohibit investors from bringing class actions or joining claims, including claims under the Securities Exchange Act of 1934 (the Exchange Act). In the most egregious …

At&T Mobility And Faa Over-Preemption, Jill I. Gross

Elisabeth Haub School of Law Faculty Publications

The Supreme Court's recent arbitration law decisions reflect the Court's strong support for arbitration agreements, but also severely limit the states’ powers to police the fairness of arbitration. In particular, the Court’s decision in AT&T Mobility v. Concepcion, LLC expands the FAA preemption doctrine beyond its prior boundaries, signaling how far the Court is willing to go to support arbitration clauses at the expense of states’ rights and the values of federalism. This article explores the impact of AT&T Mobility on the preemption of state arbitration law, and the concomitant impact on the balance between state and federal power in …

Arbitration Case Law Update 2011, Jill I. Gross

Elisabeth Haub School of Law Faculty Publications

Parties to arbitration agreements sometimes invoke the judicial system to litigate collateral issues arising out of the arbitration process, such as arbitrability of some or all of the claims, arbitrator bias, and award enforcement or vacatur. When deciding these collateral issues arising out of securities arbitration, courts interpret and apply the Federal Arbitration Act, 9 U.S.C. §§ 1 et seq. (2010) (FAA). In this chapter, we identify recent judicial decisions in the area of arbitration law, and analyze their impact on securities arbitration practice.

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 …

Attorneys As Arbitrators, Adam C. Pritchard, Stephen J. Choi, Jill E. Fisch

Articles

We study the role of attorneys as arbitrators in securities arbitration. We find that arbitrators who also represent brokerage firms or brokers in other arbitrations award significantly less compensation to investor-claimants than do other arbitrators. We find no significant effect for attorney-arbitrators who represent investors or both investors and brokerage firms. The relation between representing brokerage firms and arbitration awards remains significant even when we control for political outlook. Arbitrators who donate money to Democratic political candidates award greater compensation than do arbitrators who donate to Republican can-didates. We also study the dynamics of panel interaction. We find that the …

International Rule Of Law And Constitutional Justice In International Investment Law And Arbitration, Ernst-Ulrich Petersmann

Indiana Journal of Global Legal Studies

Judicial administration of justice through reasoned interpretation, application and clarification of legal principles and rules is among the oldest paradigms of constitutional justice. The principles of procedural justice underlying investor-state arbitration remain controversial, especially if confidentiality and party autonomy governing commercial arbitration risk neglecting adversely affected third parties and public interests. There are also concerns that rule-following and formal equality of foreign investors and home states may not ensure substantive justice in the settlement of investment disputes unless arbitrators and courts take more seriously their customary law obligation of settling disputes in conformity with human rights obligations of governments and …

Perceptions Of Fairness In Securities Arbitration: An Empirical Study, Jill I. Gross

Elisabeth Haub School of Law Faculty Publications

This Report to the Securities Industry Conference on Arbitration (SICA) documents the results of the authors’ empirical study, through a one-time mailed survey, of survey participants’ perceptions of fairness of securities Self-Regulatory Organization (SRO) arbitrations involving customers. The survey was designed to assess participants’ perceptions of the: (1) fairness of the SRO arbitration process; (2) competence of arbitrators to resolve investors’ disputes with their broker-dealers; (3) fairness of SRO arbitration as compared to their perceptions of fairness in securities litigation in similar disputes; and (4) fairness of the outcome of arbitrations.

Working Toward Fair Treatment For Retail Investors, Barbara Black

Faculty Articles and Other Publications

Twenty years ago, in Shearson/American Express, Inc. v. McMahon, the Supreme Court held that brokerage firms could require their customers to arbitrate all their disputes in industry-sponsored fora - a decision that had great significance for the law of arbitration as well as securities regulation. In 1996, a blue-ribbon task force released its report, assessing the securities arbitration process at National Association of Securities Dealers, Inc. (NASD), the principal securities arbitration forum, and the report led to several symposia on the topic coinciding with the tenth anniversary of McMahon. Since then, arbitration scholars and practitioners have intensified the debate over …

When Perception Changes Reality: An Empirical Study Of Investors' Views Of The Fairness Of Securities Arbitration, Jill I. Gross

Elisabeth Haub School of Law Faculty Publications

Arbitration in securities industry-sponsored forums is the primary mechanism to resolve disputes between investors and their brokerage firms. Because it is mandatory, participants debate its fairness, and Congress has introduced legislation to ban pre-dispute arbitration clauses in customer agreements. Missing from the debate has been empirical research of perceptions of fairness by the participants, especially investors. To fill that gap, we mailed 25,000 surveys to participants in recent securities arbitrations involving customers to learn their views of the process. The article first details the survey's background, explains the importance of surveying perceptions of fairness, and describes our methodologies, procedures, and …

Mcmahon Turns Twenty: The Regulation Of Fairness In Securities Arbitration, Jill I. Gross

Elisabeth Haub School of Law Faculty Publications

I believe that current regulation of securities arbitration does ensure that it is fair to investors. Part II of this Commentary explores the various sources of law, including the FAA, which could require fairness in securities arbitration. It revisits the first critical assumption of the McMahon Court, that the FAA's provisions for post-award judicial review protect investors from an unfair arbitration process. This Part demonstrates that, while the FAA does require “fundamental fairness” in arbitration, courts loosely construe that requirement and find most arbitration proceedings meet it easily. Part IIII of this Commentary explores SEC oversight of securities arbitration, particularly …

Equal Treatment Of Foreign Shareholders In Transnational Securities Class Action Against A Foreign Issuer—A Chinese Example, Clark Yao

ExpressO

As the world economy and financial markets become increasingly more integrated, cross-boarder securities transaction becomes a daily event. Because Unite States has the world’s largest and arguably most liquid capital markets, it has attracted a significant number of foreign companies to cross-list their stocks in a U.S. stock exchange. Unavoidably, such transactions will not only bring out fortune, but also disputes between transacting parties. Relying on the powerful federal securities law , U.S. investors who have bought or sold such stocks have routinely sued foreign stock issuers through class action when the stock prices went down, alleging their loss is …

The Explained Award Of Damocles: Protection Or Peril In Securities Arbitration, Jill I. Gross

Elisabeth Haub School of Law Faculty Publications

NASD's proposed rule change requiring arbitrators to provide written explanations in arbitration awards upon the customers' request (the “explained award proposal”), which was published for public comment in July 2005, is the clearest example of NASD's proposing a rule change in response to investors' complaints. “We have found that investors want to know more about how a panel reaches its decision,” stated NASD Chairman and Chief Executive Officer Robert R. Glauber in announcing the explained award proposal. “By giving investors the option of requiring a written explanation of an arbitration panel's decision, we will increase investor confidence in the fairness …

Developing A Law/Business Collaboration Through Pace's Securities Arbitration Clinic, Jill I. Gross

Elisabeth Haub School of Law Faculty Publications

This article details an interdisciplinary collaboration between the Securities Arbitration Clinic at Pace Law School (“SAC”) and the graduate program at Pace University's Lubin School of Business, designed and initiated by the authors. The purpose of the collaboration is to provide a co-curricular learning experience to both J.D. and graduate business students1 while enhancing the pro bono legal services delivered by SAC to its clients. Part I of this article details the history of SAC before the authors initiated the collaboration, and the reasons SAC needed financial expertise. Part II of this article describes models of interdisciplinary collaboration, particularly between …

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 …

Over-Preemption Of State Vacatur Law: State Courts And The Faa, Jill I. Gross

Elisabeth Haub School of Law Faculty Publications

This Article will examine the state courts' approach to FAA preemption on a vacatur motion since the most recent Supreme Court FAA preemption decisions. This Article will demonstrate that, with little or no analysis, state courts over-apply the FAA to commercial arbitration awards, particularly the "manifest disregard" prong, causing what I call "over-preemption" and frustrating their own state's interests in the application of its arbitration law. Part II of this Article will briefly review Supreme Court FAA preemption jurisprudence. Part III of this Article will use illustrative state court decisions to demonstrate that the state courts are applying FAA preemption …

The Selection Of An Arbitrator: A Human Resource Management Perspective, Kenneth Anderson

Scholarly Articles in Law Reviews & Journals

No abstract provided.

The Irony Of Securities Arbitration Today: Why Do Brokerage Firms Need Judicial Protection?, Barbara Black

Faculty Articles and Other Publications

In 1987 the securities industry achieved a major victory. Until then, because of the Supreme Court's 1953 holding in Wilko v. Swan that agreements to arbitrate federal securities claims contained in customer agreements were unenforceable, customers could sue brokerage firms and their salespersons in court, frequently before juries amenable to sizable verdicts, including punitive damages.

Illustrating a classic example of “be careful what you wish for,” brokerage firms no longer find arbitration entirely to their liking. Increasingly they turn to the courts to resist arbitration, to interfere with ongoing arbitration, or to undo the results of arbitration.

Unfortunately, both federal …