Finance Articles

Securities Arbitration: Improve the Investment Dispute Resolution System Now

New York, NY (PRWEB) June 13, 2007 -- Theodore G. Eppenstein of Eppenstein and Eppenstein, the New York based law firm of securities fraud and commercial arbitration and litigation attorneys with over 25 years experience, who achieved a record recovery of almost $50 million dollars for their public investor clients in just one arbitration case, has proposed five simple steps to improve securities arbitration.

At the end of 2006 the SEC Commissioner, the NASD and the NYSE announced an agreement in principal to merge the arbitration and enforcement divisions of the NASD and NYSE. Amid the fanfare in favor of the merger, Commissioner Cox of the SEC predicted the merger would be good for the industry and good for the investor. The NASD said it would send a check for $35,000 to each of its industry members (totaling about $175 million) to celebrate the expected cost savings. But where does this leave most aggrieved investors who have disputes? In the same quandary as before, with no court option - and now with no choice of arbitration forum either.

Top Five Ways to Improve Securities Dispute Resolution

The Constitutional right to trial by jury was virtually eliminated for securities fraud cases in 1987. While the SEC had previously issued releases proclaiming that compulsory arbitration for investors' statutory claims was a deceptive practice, the safeguard of judicial adjudication was rescinded by a slim vote in the U.S. Supreme Court in Shearson v. McMahon, the 1987 landmark case in which Eppenstein and Eppenstein represented public investors. The remedies:

1. Choice of Court or Arbitration: Give back to the public the right to sue in court before a jury of their peers. This is the way the system had operated previously, without complaint by public investor advocates for many decades. Today most investors who have claims against their brokers, by virtue of the mandatory brokerage arbitration agreement, are herded into proceedings behind closed doors at an industry sponsored, industry administrated forum, where an industry arbitrator has a vote in every case over a minimum amount, and where the public has to pay for costly filing fees and arbitrator payments and expenses at the SROs.

2. Option of Non-Industry Forum: Permit investors to go outside of the securities industry for arbitration of their investment losses at an independent forum with SEC oversight. The securities industry should help support the cost of the creation and maintenance of an independent forum from the cost benefits of the SRO consolidation.

3. Eliminate the Requirement for an Industry Arbitrator: For every larger SRO arbitration case, the current requirement is that one panelist be tied to the security industry, despite the fact that industry members are on trial for alleged wrongdoing. There is no benefit to investors in having a member of the securities industry sit as a judge, and the industry arbitrator only lends the appearance of potential bias and conflict of interest.

4. Cleanse the Public Arbitrator Pool: Pluck out of the pool those arbitrators who are classified as public but who nevertheless have or have had ties to the industry. New guidelines should be drafted and enforced so that when a public member is appointed, that person is "pure public."

5. Curb the Abuses Aimed at the Victims of Investor Fraud: Arbitration is supposed to be a fast, economical method to resolve disputes - an equitable tribunal to provide justice to all. The process, however, has changed over time and has become a slow, plodding, costly experience with diminished prospects that equity will be achieved. The sharp litigation tactics of the defense has been countenanced by the SROs and has represented an obstruction of justice for investors. Here is a list of some of the abusive practices that must be eliminated:
•Prohibit Motions to Dismiss: The Rule used to be that investors were entitled to an evidentiary hearing in every case. Require that investors have at least that.
•Revise the Rules to Prevent Delays: This means conducting early pre-hearing conferences with an arbitrator solely for scheduling and discovery purposes, putting teeth in discovery compliance, keeping a low tolerance for adjournments and requiring that cases be heard within nine months of filing.
•Prohibit Abusive Discovery Tactics: The time has come to put a stop to interrogatories, and place limits on the time frame and breadth of permissible inquiry and document demands of the investor about his or her background, so that investments, net worth, assets and income that post-dates the transactions at issue aren't permitted at all, and the scope of the investors' discovery obligations during the pre-relevant and relevant time periods is curtailed.
•Establish Expedited Procedures: It is time to establish special expedited arbitration rules and procedures for the elderly or infirm investor, with a pool of arbitrators willing to hear a case within a four to six month time period.

On the twentieth anniversary of the McMahon decision, reform is long overdue: it's time to restore choice to investors and fairness to the system.

About Eppenstein and Eppenstein:
       
Eppenstein and Eppenstein, in business over 25 years, is a prominent New York-based securities arbitration and commercial litigation firm with a domestic and global practice, widely known nationally and in the international community for protecting the rights of defrauded investors and businesses, as well as for obtaining significant arbitration awards and settlements for their clients. The Eppenstein and Eppenstein lawyers have extensive experience representing investors against securities and commodities brokers and their firms and representing individuals, employees and businesses in securities, corporate and commercial litigation. They have successfully recovered millions of dollars in damages for investors, including a record-setting $46 million USD recovery in 2002 against Refco Inc. The portal to the firm's website, http://www.securitieslawarbitration.com, is an introduction to the firm's history of successful representation of investors and businesses.

Mr. Eppenstein's list of common broker and brokerage firm abuses affecting the investing public includes over twenty improper practices which can be accessed easily through http://www.securitieslawarbitration.com, or directly on the firm's main website at http://www.eppensteinlaw.com. Each one of these potential claims for the aggrieved investor is fact-specific and can differ according to jurisdiction. Information about securities arbitration to recover for investor losses can also be found on the firm's informational Hotline at http://www.securitiesfraudhotline.com.

Theodore G. Eppenstein, the firm's senior partner and a practicing securities arbitration, securities fraud and commercial litigation attorney, is frequently called upon to author articles and speak at conferences on investor rights and securities fraud and commodities fraud litigation and arbitration. He has appeared as part of the NYSE's self-described "Dream Team" in symposia at the Moscow Interbank Currency Exchange in 2000 and as a primary speaker at the Cairo-Alexandria Stock Exchange in 2003. He is a two-term member of SICA, the Securities Industry Conference on Arbitration, an advisory group to the SROs on arbitration. He has met with SEC representatives approximately 40 times about arbitration matters, and has testified in Congress twice to try to return to the investor the right to a jury trial in court and to level the playing field in arbitration for aggrieved investors. His most recent article, co-authored by his partner Madelaine Eppenstein, "The Key to Getting the Panel You Want," was published in spring 2007and was presented at the latest conference on Securities Arbitration. Mr. Eppenstein has been quoted frequently in the major media, including the major financial magazines and newspapers, and has made numerous network and cable television appearances promoting the interests of public investors.

Theodore G. Eppenstein
Eppenstein and Eppenstein
767 Third Avenue, 23rd Floor
New York, NY 10017
212-679-6000
Website: http://www.securitieslawarbitration.com/

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