Securities Arbitration: How Investors Fare
GGD-92-74
Published: May 11, 1992. Publicly Released: May 12, 1992.
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Highlights
Pursuant to a congressional request, GAO: (1) provided information on securities broker-dealer policies that require investors to settle disputes through arbitration; (2) analyzed the results of securities arbitration at industry-sponsored forums; and (3) compared those results with results from an independent forum for securities arbitration.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| United States Securities and Exchange Commission | The Chairman, Securities and Exchange Commission (SEC), should require self-regulatory organizations that administer arbitration forums to develop formal standards for selecting arbitrators. |
SEC has requested the self-regulatory organizations to determine how this recommendation could be implemented. The SROs have implemented clearer standards for selecting arbitrators, including minimum experience requirements and formalizing procedures for collecting background data on potential arbitrators.
|
| United States Securities and Exchange Commission | The Chairman, SEC, should require self-regulatory organizations that administer arbitration forums to verify information submitted by prospective and existing arbitrators. |
SEC has requested the self-regulatory organizations to determine how this recommendation would be implemented. SROs have implemented procedures (1) to verify information submitted by potential arbitrators, (2) to review a central registration depository when an arbitrator applies and once a year thereafter, and arbitrators are asked at the beginning of each panel whether they have been a party to disciplinary proceedings.
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| United States Securities and Exchange Commission | The Chairman, SEC, should require self-regulatory organizations that administer arbitration forums to establish a system to ensure those arbitrators are adequately trained in the arbitration process. |
SEC has requested the self-regulatory agencies to determine how this recommendation could be implemented. The American Arbitration Association has changed its training requirements. The SROs have started requiring new arbitrators to receive mandatory training that addresses areas such as ethical considerations, conduct and arbitration procedures.
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Topics
ArbitratorsAssociationsBrokerage industryDisputes clausesInternal controlsInvestment companiesSecurities arbitrationSecurities regulationStock exchangesDispute settlements