Search

This Article contributes to the literature exploring the impact of the pandemic on arbitration and explores whether parties arbitrating their disputes during the pandemic have had access to justice equivalent to the justice that was available pre-pandemic. Though it is difficult to draw any conclusions about FINRA arbitration due to the confidential and non-reasoned nature of awards, the Article focuses on arbitration of securities industry disputes at one forum, FINRA DRS. In particular, the Article analyzes data about FINRA customer arbitrations over the course of the pandemic, from onset in March 2020 through mid-2022, when most municipalities had lifted COVID-19 restrictions. This Article proceeds in six parts. Part II briefly describes FINRA arbitration. Part III describes how the forum responded to the pandemic for its arbitration docket, including its pivot to Zoom hearings, and also discusses the pros and cons of proceeding with an arbitration hearing via Zoom. Part IV relates empirical data on the outcome of FINRA customer arbitration during the pandemic. Part V offers some analysis of the data and explores whether Zoom arbitration at FINRA impedes access to justice. Part VI concludes.

How would a court resolve a broker-dealer's action to enforce its class action waiver, which would require the court to disregard FINRA Rule 13204? The Supreme Court has identified one exception to the FAA's mandate: if a “contrary congressional command” displaces the FAA. Thus far, the Court has not had occasion to examine whether a class action waiver in a broker-dealer's employment agreement with an employee is enforceable under this exception. While the Court seems very supportive of these waivers, the securities industry is different. Securities arbitration is heavily regulated, and pronouncements by the SEC--when exercising power expressly delegated to it by Congress--make it clear that class actions in court should be preserved for both investors and broker-dealer employees. This article analyzes this issue and concludes that these class waivers are not enforceable. Part II details the regulatory framework in the securities industry relevant to this issue. Part III explains why FINRA, as a forum, does not accept class actions and why the SEC believes court-filed class actions should be preserved for employees of broker-dealers. Part IV describes the framework the Supreme Court directs courts to use when analyzing alleged conflicts between two Congressional Acts. Part V argues that FINRA's Rule 13204 barring FINRA member firms from forcing employees to waive their right to pursue class action claims in court conflicts with and supersedes the FAA's general pronouncement to enforce arbitration agreements as written. Part VI concludes.

Since the financial crisis of 2008, “shadow banking” or financial transactions by “non-banks,” has skyrocketed. Non-banks are not depositary institutions and as such, they roam free, largely outside the purview of the bank regulators. They occupy all parts of the credit markets, from mortgage loan origination to payday lenders. Untethered, they operate without government guarantees, such as deposit insurance and have no access to emergency government lending facilities, such as the Federal Reserve's discount window. There are both positives and negatives in the rise of non-banks. On the positive side is market liquidity and greater diversity of funding sources for consumer borrowing, which is often claimed to be a more efficient allocation of risk to investors. Also, by using alternative risk metrics in loan origination, non-bank lenders are increasingly making financing available to a particular demographic--the financially marginal. On the negative side, the heavy reliance on government guarantees and purchase of its loans may pose worrying systemic risks.

In In re Trulia, Inc. Stockholder Litigation, the Delaware Court of Chancery broke away from its tradition of routinely approving disclosure-only settlements and required disclosures to be material in order to cure the conflict of interest between plaintiff’s counsel and the plaintiff class. I argue that fairness of settlement is the only standard in approving class action settlements and fairness will not be achieved by requiring materiality. Shareholders are legally entitled to all material information, as the board’s fiduciary duty dictates. Thus, material disclosures are enforcement of a legal duty that is no consideration for the release of shareholder claims. On the other hand, fairness could be achieved by enforcing the bargain if the bargaining process was conducted fairly and in good faith. The agency problem and the conflict of interest between the plaintiff’s counsel and the plaintiff class can be resolved by judicial assessment on whether there was adequate representation based on the effort of the plaintiff’s counsel and the appropriate attorney fee award according to the well-established three-scale system in quantifying the appropriate attorney fees. In addition, overbroad releases can be rescinded under the contract doctrines of fraud and unconscionability if such settlements were fraudulently induced or the release is overbroad compared to the benefit that the disclosures conveyed.

This article examines when statements in a registration statement, couched as opinion, can and cannot be considered to be misstatements of material fact that could lead to liability under Section 11 (and potentially other sections) of the Securities Act. The rest of this paper is formatted as follows. We review the Omnicare case, followed by the key cases in the Second, Third, Ninth, and Sixth Circuit Courts of Appeals. The Second, Third, and Ninth Circuits have all required that, in order for there to be an actionable claim under Section 11, the plaintiff must plead not only that the statement or omission was false, but also that the defendant had subjective knowledge that its opinion was false. The Sixth Circuit, although later reversed by the Supreme Court, applied a strict liability interpretation of Section 11 and required only that the fact or omission be false or misleading. The split decisions among the circuits may be the reason that the Supreme Court granted certiorari. Then, we explain the implications of these decisions to future registrants and to professionals preparing opinions that are to be included in registration statements. This article is important to future registrants and opining professionals because of their liability implications. We conclude with the assumption that future cases will decide how to apply the new rational basis test created by the Supreme Court in interpreting when an opinion statement becomes a misstatement of material fact, or leads to an omission that renders a registration statement false or misleading in violation of Section 11.

This Article explains how to create “survivor funds”—short-term investment funds that would pay more to those investors who live until the end of the fund’s term than to those who die before then. For example, instead of just investing in a ten-year bond and dividing the proceeds among the investors at the end of the bond term, a survivor fund would invest in that ten-year bond but divide the proceeds only among those who survived the full ten years. These survivor funds would be attractive investments because the survivors would get a greater return on their investments, while the decedents, for obvious reasons, would not care. Survivor funds would work like short-term tontines. Basically, a tontine is a financial product that combines features of an annuity and a lottery. In a simple tontine, a group of investors pools their money together to buy a portfolio of investments, and, as investors die, their shares are forfeited, often with the entire fund going to the last survivor. For example, imagine that ten 65-year-old men each contribute $1000 to a fund that buys a large diamond for $10,000 and that the men agree that the last “survivor will get the diamond. Accordingly, after the ninth man dies, the tenth man gets the diamond, and he can keep it or sell it. Of course, the survivor principle—that the share of each, at death, is enjoyed by the survivors—can be used to design financial products that would benefit multiple survivors, not just the last survivor. For example, elsewhere, we showed how tontines could be used to create so-called “tontine annuities” and “tontine pensions” that would benefit lots of retirees. In this Article, we show how the survivor principle can be used to create survivor funds that would only make payments to those who survive for a specified number of years.

This chapter identifies decisions by the U.S. Supreme Court and selected federal and high state courts in the past year that interpret and apply the Federal Arbitration Act (FAA). This chapter also analyzes the impact some of these cases might have on securities arbitration practice.

This article briefly describes the task force’s formation; highlights its key recommendations (such as requiring mediation before arbitration of all claims—subject to party opt-out, and introducing a more affordable, live hearing option for small claims); analyzes in more detail a few more controversial suggestions (such as expressly banning class action waivers in customer agreements and increasing the use of explained awards), and critiques the task force’s inability to reach consensus on other hot-button issues, such as mandatory arbitration.

Arbitration has been the predominant form of dispute resolution in the securities industry since the 1980s. Virtually all brokerage firms include predispute arbitration agreements (PDAAs) in their retail customer contracts, and have successfully fought off challenges to their validity. Additionally, the industry has long mandated that firms submit to arbitration at the demand of a customer, even in the absence of a PDAA. More recently, however, brokerage firms have been arguing that forum selection clauses in their agreements with sophisticated customers (such as institutional investors and issuers) supersede firms' duty to arbitrate under FINRA Rule 12200. Circuit courts currently are split over whether, under general principles of contract interpretation, FINRA member firms can circumvent their duty to arbitrate by inserting forum selection clauses in their customer agreements. Most of these courts have not addressed the argument that the anti-waiver provision of the Securities Exchange Act of 1934 (section 29(a)) bars securities firms from forcing customers to waive their right to arbitrate disputes. The Supreme Court long ago interpreted section 29(a) to apply to waivers of substantive rights arising under the Exchange Act. Is the right to arbitrate in the FINRA forum, which is heavily regulated by the SEC to promote investor protection, a right that cannot be waived? This Article will explore the interaction between the anti-waiver provision of the Exchange Act, and the right of a customer to demand a particular dispute resolution process. This Article argues that investors' long-standing right to choose arbitration in the securities industry is a right that brokerage firms cannot force their customers to waive.

Why do broker-dealers fear a legal system in which the firms' customers have a unilateral right to demand arbitration of disputes? That scenario would return the industry to the pre-McMahon years, when, because the enforceability of PDAAs with respect to federal securities laws was in doubt, most brokerage customers had such a unilateral right. In fact, the pre-McMahon history of securities arbitration, written about only sparsely, reveals that, today, the primary stakeholders in the process--investors and brokerage firms--have lost sight of the original reason why the securities industry heavily relied on arbitration to resolve industry disputes. While offering a speedy, efficient, and fair forum was important to the industry when choosing to offer and encourage arbitration, far more important was the use of arbitration as a mechanism to protect investors from unscrupulous brokers and brokerage firms, thus building trust and credibility in the securities exchanges, and, in turn, facilitating investors' use of the exchanges for their securities trading. This article describes a more accurate history of securities arbitration, and uncovers the original purpose of designating arbitration to resolve investor disputes. This article argues that both investors and the industry have disregarded this underlying purpose, causing them to view securities arbitration through a distrusting, critical lens. Rather than cynically viewing securities arbitration as a forum created by and favoring industry players, investors should view arbitration as a central and critical component in a system of investor protection. Likewise, rather than promoting mandatory arbitration as desirable because of its speed and economies, broker-dealers and SIFMA should advertise the investor-protective benefits of the process. By reframing modern securities arbitration as an investor protection device, both industry and investors' advocates can work within the system to improve it rather than fight to

Late in 2015, the FINRA Dispute Resolution Task Force, a group formed solely for the purpose of systematically assessing and critiquing securities arbitration, released its Final Report and Recommendations. The report contains 51 individual recommendations designed to improve FINRA's heavily-regulated dispute resolution program. Some recommendations offer specific details on implementation; others urge conceptual reform of a particular aspect of the arbitration process but leave FINRA to take care of fleshing out the details. This article briefly describes the task force's formation; highlights its key recommendations (such as requiring mediation before arbitration of all claims-- subject to party opt-out, and introducing a more affordable, live hearing option for small claims); analyzes in more detail a few more controversial suggestions (such as expressly banning class action waivers in customer agreements and increasing the use of explained awards), and critiques the task force's inability to reach consensus on other hot-button issues, such as mandatory arbitration.

This chapter identifies decisions by the U.S. Supreme Court and selected federal circuit and high state courts in the past year that interpret and apply the Federal Arbitration Act (FAA) and could have an impact on securities arbitration practice.

In this article, I report on the results of my close examination of more than two dozen opinions the Court has handed down interpreting the FAA--arising primarily from commercial, consumer, employment, or securities disputes--since the beginning of the twenty-first century only fifteen years ago.19 I focus on cases in which the Court was asked to decide a question of arbitrability--whether a claim is arbitrable or whether an agreement to arbitrate is enforceable under FAA section 2. I have concluded that these decisions are built on a narrative of an arbitration process that no longer exists, although it may have existed in the twentieth century when Congress passed the FAA. The Court's antiquated understanding of the process threatens to undermine arbitration as a just alternative dispute resolution (ADR) mechanism. Part I of this article describes the process of arbitration, the law that regulates the process, and how both law and process have evolved from the twentieth to the twenty-first century. Part II zeroes in on three opinions enforcing arbitration agreements challenged by consumers seeking to bring statutory claims as class actions. All three opinions were authored by Justice Scalia in 2011, 2012, and 2013--what I call Scalia's “Hat Trick.” As I see it, Justice Scalia scored three times in the game of arbitration--and corporate counsel were likely cheering on the sidelines as their “goals” were achieved: to suppress consumers' ability to bring individual class actions against companies based on claims arising under federal statutes. Many arbitration scholars have sharply criticized those decisions as anti-consumer or anti-employee, claim suppressing, and at odds with the fundamental right to have a dispute heard in a courtroom. Part III argues that, in the Court's twenty-first-century arbitration cases, when justifying its holdings, the Court assumes without factual basis that arbitration is a one-size-fits-all process that is quick and inexpensive for all

In a sense, through its whistleblower provision, the Dodd-Frank Act has enabled the government to use corporate employee whistleblowers to support criminal prosecutions. That position finds agreement in this article, but the conclusion reached is that the results to be obtained from the whistleblower provision will be positive. Through an analysis of the Dodd-Frank Act, this article discusses further the new reach of the FCPA, particularly in light of the whistleblower and conflict-minerals provisions in the Dodd-Frank Act. Finally, this article concludes that although the new provisions can be costly, the provisions are beneficial. The traditional corporate model is now more open, as firms and individuals are required to act with greater care and, in effect, the Foreign Corrupt Practices Act has greater vitality.

Whistleblowers have a long and honorable history. From Ralph Nader blowing the whistle on the hazards of GM’s Corvair in Unsafe at Any Speed1 in the 1960’s to Jeffrey Wigand in 1996 exposing the duplicity of the tobacco industry, whistleblowers have put conscience ahead of career and personal success to expose corporate fraud and wrongdoing. Not surprisingly, they have had to endure ridicule and ostracism as well as financial hardship. Legislation has sought to protect them from retribution, often with mixed success. The most recent legislative effort is the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) that allows whistleblowers to collect a bounty for the whistleblowing and also protects the whistleblower from retaliatory acts by his or her employer. One of the challenges currently dividing the courts is determining who should come within the protection of the legislation. The Fifth Circuit Court of Appeals, in Asadi v. GE Energy, interpreted the definition of “whistleblower” quite narrowly to encompass only those individuals who make information available directly to the Securities and Exchange Commission (SEC). This interpretation by the Fifth Circuit not only rejects the broader interpretation of SEC regulations, but is also inconsistent with the decisions of various district courts that have considered this question. Part I opens with a discussion of the requirements of “whistleblower” status under both the statutory language of Dodd-Frank and the accompanying SEC regulations. Part II reviews the Asadi decision and calls into question the soundness of the court’s decision to disregard SEC regulations. Part III explores the circumstances in which administrative regulations are entitled to deference and those situations in which they may be disregarded as an overreach of power. Part IV surveys several district court decisions that have interpreted the term “whistleblower” under Dodd-Frank. Part V argues that even public policy dictates t

Part I of this Article clarifies and strictly defines the frequently nebulous idea of socially responsible investing (“SRI”), explaining its history, trends, and current status. To give perspective and perhaps temper hype, Part II discusses the efficacy of SRI as a method of change, concluding that while SRI may not have much effect on air quality or oppressive foreign governments, there are situations where SRI is useful and even necessary. Part III looks at the conflict between SRI and the fiduciary duties of trustees, investment advisers, and broker-dealers. It shows the contractual nature of fiduciary duties and why this is relevant for SRI. Part III also explores important legislation, such as ERISA, that affects fiduciary duties in certain circumstances. Further, Part III examines the superficial and non-legal analysis in some of the high-profile commentary on SRI. Part IV offers the legal analysis that has been lacking, examining SRI through the doctrines of authorization and ratification, as well as determining the effects of exculpation clauses in trust instruments and contracts. The Article concludes by explaining when SRI is lawful for fiduciaries and instructing them as to how they can engage in SRI without fear of breaching their fiduciary duties.

This chapter identifies decisions by the U.S. Supreme Court, the Financial Industry Regulatory Authority (FINRA) and selected lower federal and state courts in the past year that interpret and apply the Federal Arbitration Act (FAA) and could have an impact on securities arbitration practice.

This article proceeds as follows. Part I outlines briefly the background of MMFs. Part II discusses the role of the board of directors in governing MMFs, a role upon which our proposal would build. Part III discusses MMF-related events during the financial crisis of 2007-2008 and describes the government’s response to these events. Part IV describes the reforms the SEC instituted in 2010. Part V outlines options for further reform. Part VI outlines and discusses benefits and drawbacks of our proposed solution—unrestricted discretionary gating by fund boards. Part VII concludes.

This Article explores the birth, life, and possible death of securities arbitration clinics (SACs) in the United States. Part II of this Article describes the history of the securities arbitration clinic in the United States. Part III describes how a SAC operates and how SAC students help investors. Part IV reviews the pedagogical advantages and disadvantages of a SAC, and addresses the reluctance of many law schools to embrace this type of clinic. Part V concludes by predicting whether these clinics have a future in light of the modern challenges to clinical legal education.

The U.S. Supreme Court and lower state and federal courts continue to decide cases under the Federal Arbitration Act (FAA) at an astounding rate. This chapter summarizes Supreme Court opinions over the past year that interpret the FAA, as well as selected lower court decisions that apply the FAA and could have an impact on securities arbitration practice.

Parties to arbitration agreements sometimes invoke the judicial system to litigate collateral issues arising out of the arbitration process, such as arbitrability of some or all of the claims, arbitrator bias, and award enforcement or vacatur. When deciding these collateral issues arising out of securities arbitration, courts interpret and apply the Federal Arbitration Act (FAA). This chapter identifies recent decisions by the Supreme Court under the FAA, as well as selected lower court decisions that could have an impact on securities arbitration practice.

The Supreme Court's recent arbitration law decisions reflect the Court's strong support for arbitration agreements, but also severely limit the states’ powers to police the fairness of arbitration. In particular, the Court’s decision in AT&T Mobility v. Concepcion, LLC expands the FAA preemption doctrine beyond its prior boundaries, signaling how far the Court is willing to go to support arbitration clauses at the expense of states’ rights and the values of federalism. This article explores the impact of AT&T Mobility on the preemption of state arbitration law, and the concomitant impact on the balance between state and federal power in the arbitration arena. This article argues that AT&T Mobility results in FAA over-preemption, as it unduly shifts arbitration law-making power away from the states, in violation of the FAA’s savings clause.

In the past three decades, most recently in AT&T Mobility LLC v. Concepcion, the United States Supreme Court has advanced an aggressive pro-arbitration campaign, transforming the Federal Arbitration Act (FAA) into a powerful source of anti-consumer substantive arbitration law. In the aftermath of AT&T Mobility, which upheld a prohibition on class actions in a consumer contract despite state law that refused to enforce such provisions on unconscionability grounds, efforts have been made to prohibit investors from bringing class actions or joining claims, including claims under the Securities Exchange Act of 1934 (the Exchange Act). In the most egregious example to date, the broker-dealer Charles Schwab & Co. (Schwab) revised its customer account agreements to prohibit class actions and joinder of claims. When the Financial Industry Regulatory Authority (FINRA), the self-regulatory organization for broker-dealers, brought a disciplinary action against Schwab, claiming the revision violated FINRA rules, the broker-dealer sued FINRA, asserting that the FAA requires enforcement of its arbitration agreement. This confrontation provides a concrete opportunity to analyze how courts should resolve conflicts between the FAA and federal regulatory statutes designed to protect certain segments of the public, in this case, investors. This Article addresses whether the FAA limits the ability of federal regulators acting pursuant to Congressional authority to impose conditions and limitations on the use of arbitration provisions in order to ensure fairness. In this Article, we summarize current Supreme Court FAA jurisprudence that establishes a strong national pro-arbitration policy. We then describe the Exchange Act’s regulation of arbitration involving broker-dealers, specifically the authority delegated to the SEC and FINRA to regulate the content of arbitration clauses in broker-dealer/customer contracts and the Exchange Act’s anti-waiver provision barring any condition that f

This Comment will trace the history of Merck, culminating in the Supreme Court’s extension of the statute of limitations periods for private security fraud suits, and discuss the impact this holding will have on future security fraud litigation, both for investor-plaintiffs and issuer-defendants. Part I will examine the facts and procedural history of Merck, which began in the United States District Court for the District of New Jersey and ultimately reached the Supreme Court of the United States. This procedural background will illuminate the various interpretations existing prior to Merck regarding the events that trigger the statute of limitations period. Part II identifies the core regulations decidedly interpreted by the Supreme Court in Merck, their application to security fraud suits, and the extent of the existing circuit split. Part III extricates the essential holdings of Merck, namely the discovery requirement of scienter as a fact constituting a violation, and the rejection of inquiry notice as “discovery” so as to trigger the statute of limitations. Finally, Part IV advances several potential implications for the decision, including increased numbers of private security fraud suits and difficulty for corporations in assessing risk for purposes of D&O liability insurance.

Parties to arbitration agreements sometimes invoke the judicial system to litigate collateral issues arising out of the arbitration process, such as arbitrability of some or all of the claims, arbitrator bias, and award enforcement or vacatur. When deciding these collateral issues arising out of securities arbitration, courts interpret and apply the Federal Arbitration Act, 9 U.S.C. §§ 1 et seq. (2010) (FAA). In this chapter, we identify recent judicial decisions in the area of arbitration law, and analyze their impact on securities arbitration practice.

As discussed in this article, the proposed rule change protects bank customers who may be solicited for the purchase of investment products and services, but only to a limited extent. It does not rectify sales practices of broker-dealers--affiliated with financial institutions--which tend to confuse, and even mislead, financially unsophisticated investors of modest means who can least afford to be exposed to excessive risk. Additionally, the proposed rule change adds no meaningful surveillance, inspection, enforcement, or punitive mechanisms to prevent and/or redress insidious practices that are akin to “bait and switch” tactics and are particularly effective against financially unsophisticated investors. In fact, the proposed rule change even rolls back some key regulatory provisions, an especially unsettling retreat when one considers the lack of oversight during the recent market malaise and the contribution that such abridgement may have made to the present economic contraction as a reverse “wealth effect” impinges upon consumer behavior. In short, as demonstrated below, the proposed rule change is inadequate to sufficiently protect investors and promote genuine market integrity.

In 2008, in Hall Street Assocs. v. Mattel, Inc., the Supreme Court resolved a then-existing split in the federal circuits and held that parties cannot contractually expand the grounds for judicial review of an arbitration award when invoking the Federal Arbitration Act's vacatur provisions, elevating the finality of arbitration over the parties’ freedom of contract. The Hall Street decision necessarily impacted subsequent jurisprudence regarding parties’ motions to vacate arbitration awards. While the opinion clearly and explicitly barred further contractual expansion of grounds for review, it also avoided and thus left unresolved the issue of whether it would endorse or reject the judicially-crafted “manifest disregard of the law” ground for review of an arbitration award. In the short time since Hall Street, a new circuit split has emerged on the question of whether manifest disregard of the law survives Hall Street as a valid ground to vacate an award under the FAA. Because the scope of permissible judicial review of arbitration awards poses the fundamental policy question of whether and to what degree courts should intervene in the finality of the arbitration process to ensure its integrity, this article explores that question.

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.

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.

I believe that current regulation of securities arbitration does ensure that it is fair to investors. Part II of this Commentary explores the various sources of law, including the FAA, which could require fairness in securities arbitration. It revisits the first critical assumption of the McMahon Court, that the FAA's provisions for post-award judicial review protect investors from an unfair arbitration process. This Part demonstrates that, while the FAA does require “fundamental fairness” in arbitration, courts loosely construe that requirement and find most arbitration proceedings meet it easily. Part IIII of this Commentary explores SEC oversight of securities arbitration, particularly in the last ten years. This Part revisits the second critical assumption of the Court that this oversight ensures investors can substantively vindicate their federal securities law claims. It concludes that SEC oversight sufficiently regulates the fairness of securities arbitration. The McMahon paradigm thus appears to be working.

NASD's proposed rule change requiring arbitrators to provide written explanations in arbitration awards upon the customers' request (the “explained award proposal”), which was published for public comment in July 2005, is the clearest example of NASD's proposing a rule change in response to investors' complaints. “We have found that investors want to know more about how a panel reaches its decision,” stated NASD Chairman and Chief Executive Officer Robert R. Glauber in announcing the explained award proposal. “By giving investors the option of requiring a written explanation of an arbitration panel's decision, we will increase investor confidence in the fairness of the NASD arbitration process.”

Part I of this article will provide a brief history of ADR in the securities industry (primarily arbitration), and then will describe the emergence of mediation as an alternative to arbitration. Part II will explore the state and federal statutory regulations that arguably govern the securities mediation process, and their impact on procedural and substantive justice. In particular, this section will review the applicability to and impact on securities mediation of the Securities Exchange Act of 1934 (1934 Act), the Federal Arbitration Act (FAA), and state mediation statutes, including the Uniform Mediation Act. In this section, I will argue that the 1934 Act imposes a sufficient level of oversight over mediation to increase its fairness without interfering with its flexibility. I will then demonstrate that the FAA does not apply to mediation. Courts that hold otherwise are imposing an unnecessary layer of regulation over the process, threatening to erode its advantages. I will also argue that state mediation laws are either harmonious with or preempted by forum rules. Finally, Part III will analyze numerous dimensions of fairness as they apply to securities mediation, such as party choice, legal and procedural justice, substantive outcome, and achievement of non-legal goals. This part of the paper will identify mediation's advantages to the investor, including efficiency, lower cost, and procedural justice (advantages previously cited in connection with arbitration), as well as some of its disadvantages, including the lack of finality, the lack of discovery, and the potential need for compromise of what investors might be legally entitled to in other forums. In this part, I conclude that, as measured by these dimensions, securities mediation is a fair method of dispute resolution for the individual investor, and is a viable alternative to arbitration.

The Pace Investor Rights Project (PIRP), launched in the fall of 20033 as an expansion of Pace Law School's ground-breaking Securities Arbitration Clinic, seeks to foster increased scholarly interest on topics related to investor justice in the regulatory, arbitral and judicial arenas. The Project thus produced the Investor Rights Symposium, which took place on the grounds of the Judicial Institute at Pace Law School on March 31 and April 1, 2005, to bring together academics, regulators, practitioners, investors' advocates and students to explore the precarious balance between investor protection and wealth creation. The scholarship that follows in this volume reflects the academic and critical thoughts of six authors who explore through different lenses the various obstacles to optimal investor protection in the securities industry.

This article details an interdisciplinary collaboration between the Securities Arbitration Clinic at Pace Law School (“SAC”) and the graduate program at Pace University's Lubin School of Business, designed and initiated by the authors. The purpose of the collaboration is to provide a co-curricular learning experience to both J.D. and graduate business students1 while enhancing the pro bono legal services delivered by SAC to its clients. Part I of this article details the history of SAC before the authors initiated the collaboration, and the reasons SAC needed financial expertise. Part II of this article describes models of interdisciplinary collaboration, particularly between law and business degree programs, that the authors explored and considered before designing their own model. Part III explains the collaborative model adopted by SAC, and identifies the goals, benefits and limits of the chosen model. Finally, in Part IV, the authors offer guidance for other schools considering a similar collaboration. Part IV also illustrates how the authors' model meets the multiple needs of clients, law students and graduate business students.

This Article will examine the state courts' approach to FAA preemption on a vacatur motion since the most recent Supreme Court FAA preemption decisions. This Article will demonstrate that, with little or no analysis, state courts over-apply the FAA to commercial arbitration awards, particularly the "manifest disregard" prong, causing what I call "over-preemption" and frustrating their own state's interests in the application of its arbitration law. Part II of this Article will briefly review Supreme Court FAA preemption jurisprudence. Part III of this Article will use illustrative state court decisions to demonstrate that the state courts are applying FAA preemption in the vacatur context in an inconsistent manner and thus over-preempt the FAA. Part IV of this Article will show that, even after balancing the competing policy concerns of federalism and judicial uniformity, this "over-preemption" is not required under the Supreme Court's jurisprudence and that only in very limited circumstances must a state court apply the grounds for vacatur set forth in section 10 of the FAA. Part IV will also demonstrate that state courts need not apply the "manifest disregard" prong as part of the FAA, even if the FAA were held to apply. Part V will conclude by setting forth a framework for state courts to use when considering what law applies to a motion to vacate that takes into account Supreme Court precedent and policy considerations.

The U.S. securities markets offer the greatest opportunities for businesses that wish to raise additional capital or expand their shareholder base. Large non-U.S.corporations regularly tap the U.S. market for infusions of capital, and the securities of many non-U.S. corporations are listed on the New York Stock Exchange or traded on NASDAQ. Smaller non-U.S. entities, however, may be deterred from entering the U.S. markets because of concerns about the burdens of U.S. securities regulation. These concerns are legitimate: a decision to enter the highly-regulated U.S. securities markets should not be made lightly. For non-U.S. private issuers, perhaps the greatest difficulty in registering securities is compliance with the disclosure requirements with respect to both financial and non-financial information. This article outlines the methods by which non-U.S. entities can enter in the U.S. markets on a limited basis, as an initial step to assess whether there is a sufficient U.S. interest in their securities to warrant a more significant presence in the U.S. market.

The first part of this article looks at whether there are any legal principles derived from regulation or the case law to support an “economic suicide” claim. The second part of the article reviews arbitrators' awards to determine whether arbitrators do, in fact, decide favorably on economic suicide claims. The article also looks at some arbitrators' awards that appear to recognize an economic suicide claim to identify any factors that may lead arbitrators to award damages to the claimant. Finally, in the third part, we address whether policy considerations support an extension of recognized brokers' duties to include a duty to prevent the customer from economic suicide.

What is the current role of the law in securities arbitration? Given the difficulties investors would encounter in pleading and proving their claims in court, they may well be better off in a system where less attention is paid to the law and more to the equities of the actual dispute before the arbitration panel. While this is not a system where accountability and predictability of results can be achieved, investors may, in fact, fare better than they might expect. It follows then that if equitable considerations enhance rather than subtract from investors' chances of recovery, then investors need not worry about the consequences of the arbitrators' failure to apply the law.

This article addresses recent regulatory efforts to proscribe undisclosed conflicts of interest beyond mere scalping, including ownership interests in recommended securities, and the compensation connection between analysts and investment bankers within a firm. Part III of this article traces the history of prior cases imposing liability on industry participants, including investment advisers, analysts and others, for failing to disclose their conflicts of interest when recommending securities. Part IV of this article then examines the question of whether analysts have any civil liability to those relying on their recommendations for failure to disclose actual or potential conflicts of interest. Finally, the author concludes that, in light of the new regulations, analysts should be liable to investors for their undisclosed conflicts of interest.