Arbitration (redirected from Arbitaration)

arbitration

A process for settling disputes between securities firms or between securities firms and their customers in which the parties submit their differences to the judgment of an impartial third party or parties. Many brokerage firms require their customers to sign an agreement for binding arbitration to resolve disputes. The agreement requires the customer to accept the arbitrator's decision and to waive the right to subsequent legal action. Pressure from the SEC and a 1990 court decision now allows investors the option of using an independent arbitration panel in place of a securities-industry panel. Compare mediation. See also NASD Dispute Resolution, Inc.

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Arbitration. Arbitration is a way to resolve conflicts between parties or individuals, and may be considered a middle ground between the more cooperative, informal nature of mediation and the more expensive, involved, and lengthy process of litigation.

Usually, when you open a brokerage account, you sign an agreement to use arbitration to resolve possible conflicts with the firm and waive the right to sue for damages in court.

Arbitration is binding, which means you can't appeal the decision or try for a different result by going to court. Most investment-related arbitration claims are handled by either NASD, the main self-regulatory body that supervises brokers, or the New York Stock Exchange (NYSE).

In arbitration, a trained impartial arbitrator or panel of arbitrators reviews the evidence, decides on the outcome, and sets any award. While arbitration is usually less expensive than litigation, arbitration and attorney fees make it a more expensive option than mediation.