When Perception Changes Reality: An Empirical Study of Investors' Views of the Fairness of Securities Arbitration
Journal of Dispute Resolution, Vol. 2008, p. 349, 2008
3rd Annual Conference on Empirical Legal Studies Paper
U of Cincinnati Public Law Research Paper No. 09-12
64 Pages Posted: 11 Apr 2008 Last revised: 2 Feb 2010
Date Written: April 15, 2009
Abstract
Arbitration in securities industry-sponsored forums is the primary mechanism to resolve disputes between investors and their brokerage firms. Because it is mandatory, participants debate its fairness, and Congress has introduced legislation to ban pre-dispute arbitration clauses in customer agreements. Missing from the debate has been empirical research of perceptions of fairness by the participants, especially investors. To fill that gap, we mailed 25,000 surveys to participants in recent securities arbitrations involving customers to learn their views of the process. The article first details the survey's background, explains the importance of surveying perceptions of fairness, and describes our methodologies, procedures, and survey error structure. We then present our findings, including our primary conclusions that (1) investors have a far more negative perception of securities arbitration than all other participants, (2) investors have a strong negative perception of the bias of arbitrators, and (3) investors lack knowledge of the securities arbitration process. We also offer several explanations for these negative perceptions. We conclude that customers' negative perceptions transform the reality faced by policy-makers and mandate reform of the process, including the elimination of the industry arbitrator requirement and further public deliberation on the value of the explained award.
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
It's Not About the Money!: A Theory on Misconceptions of Plaintiffs' Litigation Aims
By Tamara Relis
-
Reforming State Consumer Protection Liability: An Economic Approach
-
Damage-Based Contingency Fees in Employment Cases: A Survey of Practitioners
By Richard Moorhead and Rebecca Cumming
-
Federal Administration and Administrative Law in the Gilded Age
-
By Gary Blasi and Joseph W. Doherty
-
Are State Consumer Protection Acts Really Little-FTC Acts?
By Henry N. Butler and Joshua D. Wright
-
Consumer (In)Justice: Reflections on Canadian Consumer Class Actions