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April 23, 2013

SEC Commissioner: We Need to Support Investor Choice

State securities regulators were on Capitol Hill on Wednesday, attempting to gain support for restricting, or ending, mandatory arbitration clauses between clients and brokers. Currently, arbitration clauses are standard in brokerage contracts and require any claim of loss to be settled in binding arbitration instead of with the Court.

“Investors should not have their option of choosing between arbitration and the traditional judicial process taken away from them at the very beginning of their relationship with their brokers and advisers,” Securities and Exchange Commission member Luis Aguilar said on Tuesday at the North American Securities Administrators Association’s annual conference in Washington, D.C.

The 2010 Dodd-Frank Act provides the SEC with the authority to limit or prohibit arbitration requirements for broker-dealers and investment advisers. In order to reform the arbitration clause, at least three of the five SEC commissioners must vote to support the measure.