In­vestors vs. Bro­kers

Daily Freeman (Kingston, NY) - - BUSINESS -

The scan­dal over ag­gres­sive sales prac­tices at Wells Fargo, where em­ploy­ees al­legedly opened mil­lions of fake ac­counts with­out cus­tomers’ con­sent, has put a spot­light on so-called “forced ar­bi­tra­tion” used by banks in dis­putes.

Ar­bi­tra­tion pro­vi­sions in con­tracts pro­hibit cus­tomers from su­ing a bank. Crit­ics say the “fine-print” re­stric­tions block Wells Fargo cus­tomers who were harmed from press­ing le­git­i­mate claims in court.

Manda­tory ar­bi­tra­tion also is used by the se­cu­ri­ties in­dus­try to re­solve in­vestors’ dis­putes with their bro­kers and bro­ker­age firms. The same crit­i­cisms are made: The closed-door pro­ceed­ings are said to be of­ten bi­ased and un­fair to in­vestors.

The pan­els of ar­bi­tra­tors hear­ing cases are or­ga­nized by the Fi­nan­cial In­dus­try Reg­u­la­tory Au­thor­ity, Wall Street’s polic­ing body. There are two kinds of ar­bi­tra­tors: non-pub­lic, peo­ple as­so­ci­ated with the in­dus­try, and pub­lic, those with­out in­dus­try ties and from any back­ground. The num­ber of pub­lic ar­bi­tra­tors fell by 638, or 18 per­cent, from April to De­cem­ber 2015.

A FINRA task force has rec­om­mended changes to make the process more im­par­tial and trans­par­ent. They in­clude ac­tively re­cruit­ing new ar­bi­tra­tors, im­prov­ing their train­ing and con­sid­er­ing re­leas­ing more in­for­ma­tion to the pub­lic.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.