Thursday, June 18, 2009

Time For Government Mandated Arbitration to Go

The government's financial reform plan has been released, and is available online at the link.

This might be the start of the end of arbitration agreements in brokerage accounts, as the report recommends that the SEC "study" the issue. The underlying argument is that pre-dispute arbitration agreements are not fair to the individual, because his is giving up his right to go to court of any dispute he might have, and he is giving it up before the dispute arises.

That position is debatable, but this proposal raises a significant question. If you accept the unfairness premise as begin true, why aren't we discussing the fact that the SEC (through its underling, FINRA) forces individuals to arbitrate their claims, by use of a rule that requires every employee of the brokerage industry to arbitrate disputes with his employer, and every customer.

Why isn't anyone talking about government mandated arbitration by employees and individuals in the brokerage industry?

Is there any other industry where the government mandates that its employees arbitrate every dispute they might have?

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