Arbitration bill to cover securities contracts

Legislation that would prohibit mandatory arbitration clauses will be rewritten to ensure that it covers securities contracts, the chairman of a Senate Judiciary subcommittee said today.
The Arbitration Fairness Act, introduced by Sen. Russ Feingold, D-Wisc., “is intended to cover disputes between investors and securities brokers,” Mr. Feingold said at a hearing he held today on his bill.
Mr. Feingold, chairman of the constitution, civil rights and property rights subcommittee, said that the bill’s provision covering consumer disputes was intended to cover securities disputes, “but to clear up any uncertainty, we will make the intent even clearer when we mark up the bill in committee.”
The securities industry opposes the bill, saying the arbitration system is a more efficient, low-cost way to handle disputes than taking cases to court, and that the system allows for expert judgments.
The North American Securities Administrators Association Inc. of Washington, which represents state securities regulators, support Mr. Feingold’s bill.
“The only chance of recovery for most investors who fall victim to wrongdoing on Wall Street is through a single securities arbitration forum maintained by the securities industry,” testified Tanya Solov, director of the Illinois Securities Department.
“Many investors remain unaware of this industry arbitration provision, fail to appreciate its significance, or feel powerless to negotiate a different approach to dispute resolution with their brokers,” she said at the hearing.