Originially from: World Arbitration and Mediation Review (WAMR)

MEDIATION OF SECURITIES DISPUTES COMPARES
FAVORABLY WITH ARBITRATION
By Michael S. Gillie, Executive Director, United States Arbitration & Mediation
Editor’s Note: USA&M, a nationwide network of ADR offices, is a participant
in the National Association of Securities Dealers (NASD) Mediation Program,
which offers mediation for securities-related disputes (see 2 WAMR 185), Many
securities firms and claimants’ attorneys have participated in the program. Gillie
based the following article on that experience.
Alternative to Arbitration
Many, if not most, customer-broker disputes are now handled through
arbitration rather than through litigation because agreements between customers
and brokers routinely include arbitration clauses. Although arbitration is faster
and cheaper than litigation, it also shares many of its unfavorable characteristics,
such as being stressful, occasionally quite expensive, and always fraught with
potential for delay and uncertainty. These shortcomings for the disputants are
almost inevitable whenever an outside party is authorized to render a final,
binding decision in their case.
These disadvantages in arbitration have led parties to the use of mediation, a
process that improves the parties’ chances of reaching an early, agreed-to
settlement. The legal profession and many American businesses—including most
major insurance companies—have now made mediation a part of their day-to-day
claims process. In the securities field, the NASD has established, and recently
expanded, a Mediation Pilot Project for cases that have filed for arbitration.
Mediation, unlike arbitration, does not involve a formal hearing and a binding
decision. Instead, all sides voluntarily come to a mediation session to discuss the
case and how it might be settled. The mediator—who is usually an attorney, at
least in securities cases—works with the parties to analyze the risks of litigation
and to explore settlement possibilities.
Mediation in the securities field has proven very effective—most cases that
mediate will settle. Early settlements benefit everyone by saving arbitration or
litigation costs, avoiding additional issues, keeping the parties on the best terms
possible in the circumstances, and obtaining a result that is acceptable to
everyone.