Social Security taxes weren’t really cut

Just a note about the Short Interests item “Tax break? What tax break?” (March 7), which concerned the lack of awareness of the reduction in the Social Security withholding in paychecks.

Last year, there was a 2% reduction in federal withholding, which expired Dec. 31, as it wasn’t renewed in all the tax extensions. The 2% reduction in Social Security withholding just keeps people the same as last year if they are working.

For those who have pensions, they actually saw a reduction because tax withholding went back up, but they don’t receive the Social Security reduction. Maybe no one noticed the increase in their paycheck because there wasn’t one.

Steven E. Tibbitts

Principal

Tibbitts Financial Consulting

Allegan, Mich.

Arbitration is often better than litigation

The editorial “SEC gave investors half a loaf in arb panel ruling” (Feb. 14) presents an unfortunately misinformed or at least underinformed argument regarding the use of arbitration in Finra disputes.

The crux of the argument rests in the second paragraph, where the author states: “Forced arbitration should be abolished and investors’ Seventh Amendment rights to a trial by jury upheld as an option.”

The editorial fails to understand that an arbitration clause doesn’t exist in a vacuum.

No one points a gun to the customer’s head and says, “Sign here.” The customer can certainly decline to become a customer and make his or her own investment decisions.

After all, many disputes arise from the suitability of a broker’s recommendation. And because arbitration is relatively quicker and less expensive than litigation, firms may simply choose not to accept customers of more modest financial means, as they present a disproportionately greater risk to the revenue that they generate.

Contrary to the editorial’s “duh” approach, the arbitration-versus- litigation decision requires a more-thoughtful consideration. The primary goal of arbitration is to apply the principals of justice unencumbered by the strict technicalities of a court of law.

[The Financial Industry Regulatory Authority Inc.] actually requires member firms to arbitrate in many circumstances if the customer elects to do so, even if the member firm would rather litigate (Finra Rule 12200). The rationale is that it would be more likely that a customer could receive a more equitable decision rather than simply a just one.

After all, member firms can employ significant litigation resources designed to take advantage of the procedural rules of a court, delivering only the equity that may be found within the confines of the law and rules of the court.

One of the many advantages of arbitration is much more flexibility to admit evidence that would otherwise be excluded in court. This alone allows the panel a more complete picture of the circumstances of the dispute.

Panels also have much more discretion to apply sanctions for violation of the forum rules, even preclude one party from presenting evidence that may otherwise be admitted and make a disciplinary referral of a member firm to Finra’s regulatory unit without violating customer privacy. Don’t forget: Litigation drags all of a customer’s personal financial information into the public record — permanently.

Even some compliance officers that I have spoken with have secretly opined that litigation might be a better option for broker-dealers than arbitration. Makes sense, right?

If you have substantial resources, you can use all the rules to your advantage. After all, it was easier to convict Martha Stewart for lying to the FBI than it was for insider trading.

Do you think Mr. Average Joe would have had a similar outcome?

As the proverb goes, be careful what you wish for. You might just get it!

Andrew E. Oster

Finra-qualified non-public arbitrator

President and chief compliance officer

Triton Wealth Advisors LLC

Edmond, Okla.

Related Topics: Letters To The Editor