Document Type

Article

Abstract

Part I of this article will provide a brief history of ADR in the securities industry (primarily arbitration), and then will describe the emergence of mediation as an alternative to arbitration. Part II will explore the state and federal statutory regulations that arguably govern the securities mediation process, and their impact on procedural and substantive justice. In particular, this section will review the applicability to and impact on securities mediation of the Securities Exchange Act of 1934 (1934 Act), the Federal Arbitration Act (FAA), and state mediation statutes, including the Uniform Mediation Act. In this section, I will argue that the 1934 Act imposes a sufficient level of oversight over mediation to increase its fairness without interfering with its flexibility. I will then demonstrate that the FAA does not apply to mediation. Courts that hold otherwise are imposing an unnecessary layer of regulation over the process, threatening to erode its advantages. I will also argue that state mediation laws are either harmonious with or preempted by forum rules. Finally, Part III will analyze numerous dimensions of fairness as they apply to securities mediation, such as party choice, legal and procedural justice, substantive outcome, and achievement of non-legal goals. This part of the paper will identify mediation's advantages to the investor, including efficiency, lower cost, and procedural justice (advantages previously cited in connection with arbitration), as well as some of its disadvantages, including the lack of finality, the lack of discovery, and the potential need for compromise of what investors might be legally entitled to in other forums. In this part, I conclude that, as measured by these dimensions, securities mediation is a fair method of dispute resolution for the individual investor, and is a viable alternative to arbitration.

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