Ever since Financial Industry Regulatory Authority (FINRA) began governing the alternative dispute resolution (ADR) procedures of the Securities Law disputes, arbitration has been more dominant and popular among the two ADR methods that FINRA has provided, mediation and arbitration. Though the popularity of the arbitration has some advantages, the dominance limits the other method, mediation, from being employed for its potential benefits. If a systematic reform enhances the use of the mediation, FINRA and its customers will benefit from more effective procedures. Therefore, this paper intends to suggest that adopting a hybrid form of the two existing methods called Med-Arb is the right systematic application to improve the FINRA ADR practice to get more out of its mediation implements.
II. ADR IN SECURITIES DISPUTES
A. Regulatory Structure of the U.S. Securities Industry To understand the legal administration of the U.S. Securities industry, two institutions must be introduced, FINRA and Securities and Exchange Commission (SEC). FINRA regulates and authorizes securities-related ADR practices,1 and SEC oversees FINRA’s performances.2 In simpler terms, FINRA controls the Securities ADR practices under the SEC’s oversight. The U.S. Securities market’s legal structure stems from the SEC. The SEC is a government institution which monitors and regulates general operations of the Securities market.3 The U.S. legislature created the SEC with the Securities Exchange Act of 1934 and delegated power to govern the market function.