Arbitrability of Securities Disputes between Brokers and Customers - Phillips v. Merrill Lynch, Pierce, Fenner (and) Smith, Inc., The

Abstract

INTRODUCTION|The increased frequency of litigation between the public and the securities industry is a result of increased public participation in the stock exchanges. Securities broker-dealers are interested in the speedy resolution of disputes with securities customers because broker-dealers often extend credit to these customers. Thus, securities customers are often required to sign an arbitration agreement upon opening an account with a securities broker-dealer. |Congress enacted the United States Arbitration Act in 1925 to assure enforcement of arbitration agreements. However, in passing the Securities Act of 1933 and the Securities Exchange Act of 1934, Congress included section 14 in the Securities Act and section 29(a) in the Exchange Act which prohibit the waiver of any provisions of those Acts. Thus, the non-waiver provisions of the federal securities laws preclude the securities customer from waiving the right, granted by section 22(a) of the Securities Act and section 27 of the Exchange Act, to bring suit in federal court. |In Phillips v. Merrill Lynch, Pierce, Fenner & Smith, Inc., the Eighth Circuit Court of Appeals was faced with the issue of whether a securities customer's agreement to arbitrate Exchange Act claims was void under the non-waiver provision of section 29(a) of the Exchange Act. In Phillips, the Eighth Circuit determined that the strong federal policy favoring enforcement of arbitration agreements...