Wednesday, February 6, 2008
The Securities Industry Conference on Arbitration (SICA) commissioned Professor Jill Gross of Pace Law School and myself to conduct an empirical study of participants' perceptions of the fairness of the SRO securities arbitration process relating to customer-broker disputes. Our survey was released today and is available at the Pace website. Here is the Executive Summary:
Survey participants have divided views about the fairness of securities arbitration, based on their most recent experience with the process. In general, when asked to focus on their most recent dispute filed for arbitration, participants overwhelmingly agreed that the arbitration panel listened to the parties, their representatives and the witnesses and gave the parties enough time to present their evidence and argue the merits of their cases. Participants also perceived that the arbitrators appeared competent to handle the dispute, to resolve pre-hearing issues, and to understand the issues and legal arguments in the case. They also believed that the discovery process allowed them to obtain the necessary information for a hearing.
In contrast, participants’ perceptions as to other aspects of the panel’s performance in their most recent dispute were more mixed; in particular, whether the panel was open-minded and impartial and whether the panel applied the law. Views were also divided on whether the hearings took too long and whether the arbitration process was too expensive. Survey participants were divided about whether they would recommend that others use arbitration to resolve their securities disputes; whether they had a favorable view of securities arbitration; and whether the outcome was very different from their initial expectations.
Furthermore, overall, participants were not satisfied with the outcome of their most recent dispute and would be more satisfied if they had an explanation of the award. Many survey participants with recent comparable experience in a civil court case perceived arbitration as unfair by comparison.
Finally, when asked about their overall perception of securities arbitration (as opposed to their perceptions derived from their most recent experience), survey participants were more negative. Although participants agreed that arbitration is conducted in a simple way, they were split as to whether the process is economical, and they disagreed with the statements that it is conducted without bias and conducted in a way that is fair to all parties.
For almost every question in the survey, statistical analysis reveals that customers have a more negative perception of the process than non-customers, as we detail throughout the report.