Investor Arbitration Information is No Longer Being Maintained

As of September 1, 2008, Vincent DiCarlo, who maintained this site, is no longer engaged in the private practice of law. His former law office website is at.

This site is no longer maintained, may no longer be accurate,and is provided for historical purposes. See disclaimer below.

Advantages and Disadvantages of NASD Investor Arbitration

Where the investor has a choice between arbitration and a lawsuit, arbitration can have significant advantages. Simplified procedures, such as the lack of formal pleading rules, the absence of most pretrial motions, and simplified discovery can substantially reduce the cost of obtaining a decision. NASD investor arbitration can also have significant disadvantages.

Most brokerage firms now require their customers to sign NASD investor arbitration agreements when they open an account. These agreements are generally enforceable, so if you have signed one, you probably don't have a choice and will be required to arbitrate your claims even though, for technical reasons, sometimes a lawyer will choose to file your case in court first before it is ordered to arbitration. If there is no arbitration agreement, and your claims are against a stockbroker, the rules of the National Association of Securities Dealers and applicable law give you a choice between NASD investor arbitration and court.

In arbitrations before the National Association of Securities Dealers, when a panel of three arbitrators hears the case, one will be a stockbroker or other member of the securities industry. Typically, the other two panel members are lawyers, accountants, or other professionals. As a result, it is often easier to present cases involving industry practices or complex damages models to an arbitration panel than to a judge or jury.

Because the rules of the NASD require that NASD investor arbitration awards be paid promptly, on pain of disciplinary proceedings against the broker, such arbitration has the advantage that it is sometimes easier to collect an arbitration award than a court judgment. Finally, the grounds for setting aside an arbitration award are extremely narrow, much narrower than the grounds for appealing a judgment, which is another significant advantage for NASD investor arbitration. As a result, costly appeals are usually unnecessary.

On the other hand, litigation in court has its advantages as well as disadvantages for investors. In certain cases, the right to conduct extensive discovery, the right to appeal an adverse judgment, and the right to a jury trial will outweigh the advantages of arbitration. Therefore, if you have not signed a mandatory arbitration agreement, your lawyer may advise you to proceed in court rather than by NASD investor arbitration.

DISCLAIMER: Vincent DiCarlo, who authored and maintained this site, has entered government service and, as of September 1, 2008, is no longer engaged in the private practice of law. Therefore, this site is no longer being maintained, may not be accurate, and should not be relied upon. It is not now and was not ever intended as legal advice. It is being provided for historical purposes, and for the benefit of those lawyers who are capable of independently verifying the information and judging the opinions in it, and then reaching their own conclusions. You are strongly advised to consult qualified legal counsel before adopting any of the ideas or suggestions in this material, which may or may not be applicable in your jurisdiction or to your specific situation, and may no longer be accurate or prudent in any case. The opinions and statements at this site were solely those of the author. They were not and are not those of, nor were they nor are they made on behalf of, any agency of government or anyone else.

Copyright Â© 1998-2008 Vincent DiCarlo