Published: May 2013

Protecting investors from surrendering their rights

Investors continue to be harmed by one-sided clauses in contracts that force individuals to surrender their rights and resolve disputes with brokerage firms in arbitration. The SEC has the power to change that.

Consumer Action and its coalition advocates urge the U.S. Securities Exchange Commission's (SEC) new Chairman, Mary Jo White, to review and exercise the authority to restrict pre-dispute binding mandatory arbitration granted to the SEC in the Dodd-Frank Act. Instead of an open court system, individuals are currently subject to a private arbitration provider that charges exorbitant filing and hourly fees and whose neutrality is questionable due to the fact that the business –and not the individual – is a likely repeat user of the process.

The securities market is a leading example of the principle that private enforcement is a necessary counterpart to public enforcement. Private action encourages ethical corporate behavior and permits investors to recover losses caused by misconduct. Seven SEC commissioners have shared this sentiment.

The 2008 financial crisis, the effects of which the country continues to wrestle with five years later, should be enough to motivate the Commission to restore investors’ legal rights. Brokerage firms were responsible for many fraudulent actions that led to or arose from the financial crisis.

Other Organizations

AARP | Americans for Financial Reform | American Association for Justice | Center for Justice and Democracy | Citizen Works | Consumer Action | Consumer Federation of America | Consumers Union | DC Consumer Rights Coalition | Homeowners Against Deficient Dwellings | National Association of Consumer Advocates | National Association of Shareholder and Consumer Attorneys (NASCAT) | National Consumers League | Public Citizen | U.S. Public Interest Research Group (PIRG) | Workplace Fairness

More Information

For more information, please visit Public Citizen's website.

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Protecting investors from surrendering their rights   (GroupsSECletter-921.pdf)