It is almost a universal practice to include an arbitration agreement when an investor opens a brokerage account or commodities, mutual fund account. An investor will find that in the process of signing up for a brokerage account there is a standard arbitration agreement contained in the packet of information. This article addresses some of the history of the stock brokerage arbitration agreement and the reasoning behind the agreement. Not all arbitration agreements are alike and therefore if you have any questions about the legality of the agreement you should contact a competent attorney in the field of securities arbitration agreements.
The reasoning behind the accepted practice of arbitrating disputes with your stock broker and mutual fund manager is the notion that arbitration can be handled privately, with a qualified expert arbitrator in a reasonable period of time. While it is not required an investor may file a simple letter complaint. The necessity of hiring an attorney to file the complaint. It may be advisable, but it is not necessary to hire an attorney. The rules and guidelines for arbitration are set forth on the New York Stock Exchange web site or may be requested by mail.
The history of the arbitration agreement in the United States stock exchange has a 200 year history. The Courts and Congress have uniformly favored the arbitration agreement signed when the account is opened. That is not to say that all arbitration agreements are flawless. Some arbitration agreements have been voided for various reasons.
