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Why do broker-dealers fear a legal system in which the firms' customers have a unilateral right to demand arbitration of disputes? That scenario would return the industry to the pre-McMahon years, when, because the enforceability of PDAAs with respect to federal securities laws was in doubt, most brokerage customers had such a unilateral right. In fact, the pre-McMahon history of securities arbitration, written about only sparsely, reveals that, today, the primary stakeholders in the process--investors and brokerage firms--have lost sight of the original reason why the securities industry heavily relied on arbitration to resolve industry disputes. While offering a speedy, efficient, and fair forum was important to the industry when choosing to offer and encourage arbitration, far more important was the use of arbitration as a mechanism to protect investors from unscrupulous brokers and brokerage firms, thus building trust and credibility in the securities exchanges, and, in turn, facilitating investors' use of the exchanges for their securities trading. This article describes a more accurate history of securities arbitration, and uncovers the original purpose of designating arbitration to resolve investor disputes.

This article argues that both investors and the industry have disregarded this underlying purpose, causing them to view securities arbitration through a distrusting, critical lens. Rather than cynically viewing securities arbitration as a forum created by and favoring industry players, investors should view arbitration as a central and critical component in a system of investor protection. Likewise, rather than promoting mandatory arbitration as desirable because of its speed and economies, broker-dealers and SIFMA should advertise the investor-protective benefits of the process. By reframing modern securities arbitration as an investor protection device, both industry and investors' advocates can work within the system to improve it rather than fight to tear it down.