It should not be difficult for investors to translate the soaring political rhetoric into action.
Find out the position of the candidates on the Fairness in Arbitration Act of 2007. This proposed legislation would ban mandatory arbitration clauses in consumer agreements, including agreements with stock brokers and advisors.
This legislation is long overdue. Arbitration is no longer a fair and impartial dispute resolution process between two willing parties, playing on a level field. Instead, it is imposed on consumers in the majority of all consumer transactions. It is required of 100% of investors who do business with brokers in this country.
It is not just the mandatory nature of arbitration that is so offensive. These clauses require arbitration administered by private arbitration companies, many of whom derive all of their income from the industry that is being sued.
For investors, it is even worse. They are consigned to mandatory arbitration administered by the Financial Industry Regulatory Authority (FINRA), whose members are the brokers who are the defendants in these cases.
Arbitrators appointed by these powerful vested interests understand that their careers are over if they make a meaningful award against their clients. Indeed, it is not uncommon for arbitrators who rule for consumers and investors to be removed from the list of panelists considered for future arbitrations.
The data supports the view that these panels are biased and rigged against consumers and investors. The Christian Science Monitor reported that consumers lost 96% of the cases adjudicated by a large private arbitration firm.
A study I co-authored found that investors have an exceedingly small likelihood of recovering any significant damages from major brokerage firms in FINRA administered mandatory arbitration proceedings.
While companies extol the virtues of binding arbitration in agreements with their customers, according to a prominent study, they rarely agree to it in agreements they enter into with other commercial entities.
NASAA, an association of state securities regulators, testified in support of the passage of the Arbitration Fairness Act. Tanya Solov, Director, Illinois Securities Department, summed up the position of NASAA as follows: "NASAA believes the "take-it-or-leave-it" clause in brokerage contracts is inherently unfair to investors, and we support the Arbitration Fairness Act of 2007 as a positive step in the right direction. In the securities context, the investor and the brokerage firms are not on equal footing."
At first blush, it would seem that the Democrats are on the winning side of this legislation. It's sponsor is Russ Feingold (D-WI). All six co-sponsors are Democrats.
But now Senator McCain and Governor Palin are asserting that they are the real agents of change. They tell us that they will reach across partisan boundaries to act in the best interests of the people and not bend to the will of the powerful lobbyists who represent the securities industry and other corporate interests.
Great. Let's ask both candidates to support passage of the Fairness in Arbitration Act of 2007. It will have a direct and profound impact on ordinary, hard working Americans, by restoring their constitutional rights.
You don't have to be a barracuda or a pit bull (with or without lipstick) to support this legislation. You don't even need to know how to field dress a moose.
All that is required is a genuine concern with doing the right thing.
Fight with me.
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