Perceptions of Fairness of Securities Arbitration: An Empirical Study

Abstract:     
This Report to the Securities Industry Conference on Arbitration (SICA) documents the results of the authors' empirical study, through a one-time mailed survey, of survey participants' perceptions of fairness of securities Self-Regulatory Organization (SRO) arbitrations involving customers. The survey was designed to assess participants' perceptions of the: (1) fairness of the SRO arbitration process; (2) competence of arbitrators to resolve investors' disputes with their broker-dealers; (3) fairness of SRO arbitration as compared to their perceptions of fairness in securities litigation in similar disputes; and (4) fairness of the outcome of arbitrations. We conclude that survey participants have divided views about the fairness of securities arbitration based on their most recent experience with the process. When asked about their overall impressions of securities arbitraiton, survey participants were more negative. For almost every question in the survey, statistical analysis reveals that customers have a more negative perception of the process than non-customers. Part I of this report provides an Executive Summary of our findings. Part II details the Background of the survey's development. Part III describes the Methodologies and Procedures we implemented to conduct the survey. Part IV identifies the Error Structure potentially contained in our methodologies. Part V contains our Findings as to each survey question, including, for many questions, breakdowns that isolate responses of customers only and compares them to all other categories of survey participants, as well as comparisons of regional differences among survey participants. We conclude in Part VI by noting the complexities of the findings.

Keywords: securities, arbitration, dispute resolution fairness, empirical study

JEL Classifications: K22, K10

Working Paper Series