Meyer Wilson Partner and President of the Public Investors Advocate Bar Association (PIABA) David P. Meyer was recently quoted by several media outlets for insight into proposed legislation that would prohibit broker-dealers and advisors from making clients sign mandatory arbitration agreements.
The proposed bill, known as the Investor Choice Act, would prohibit any “broker, dealer, funding portal or any municipal securities dealer” from requiring investors to sign mandatory arbitration agreements. It would also void existing arbitration agreements, prohibit advisors and broker-dealers from forcing investors to waive their right to bring class action lawsuits, and prohibit any security from registering with the SEC if its issuer mandated arbitration for client / advisor agreements.
The Investor Choice Act is supported by many who say it’s a needed step in stripping away some of the powerful advantages brokers, dealers, and advisers hold over investors. As Attorney David Meyer tells Financial Advisor magazine:
“Investors should be able to exercise their right to a day in court if they believe that is the best remedy. If arbitration is an appropriate option, investors should have the right to evaluate it as an option after their dispute arises.
Many investors, however, are still likely to choose FINRA arbitration because is often the best option for aggrieved investors to pursue their claims against their broker and brokerage firm. The FINRA arbitration process has improved significantly over the past 20 years. And, if the playing field is leveled by giving investors the choice to pursue arbitration at the time the dispute arises, I firmly believe the FINRA arbitration process will work hard to make the process more fair and transparent.”
Mr. Meyer was also quoted by Wealth Management and InvestmentNews about the bill and its potential impact on the FINRA arbitration process, which he says would need to become more fair in order to attract the cases. “If arbitration is not a monopoly, the process itself will improve.”
“For brokerage firm disputes, it seems clear that many investors would still choose to use FINRA dispute resolution. But the existence of real choice undoubtedly would have the salutary side effect of making the FINRA process fairer, more transparent and more investor friendly. Giving investors the option to also bring claims in court when appropriate would help to ensure that FINRA will continue to improve the arbitration process such that many investors opt to have their cases heard there.”