State and provincial regulators are calling on U.S. lawmakers to take action to ensure that retail investors have recourse to pursue claims in court, in the wake of a ruling enforcing mandatory arbitration.
The North American Securities Administrators Association (NASAA) said that a recent U.S. Supreme Court decision "has handed large corporations a significant victory in a decision that represents a further erosion of consumer rights and underscores the need for Congress to take action to prohibit forced arbitration."
NASAA says that a decision last week from the Supreme Court found that a group of merchants were bound by individual arbitration agreements with American Express Co. even if a class action is the only way to make the claim economically viable. "The decision, which supported the enforceability of an arbitration agreements class action waiver, has sparked mounting outrage among public interest, civil rights and consumer groups," it says.
"The Supreme Courts ruling effectively invites large corporations to use arbitration agreements to disregard effective vindication of consumer claims through class actions," said Heath Abshure, NASAA president and Arkansas securities commissioner.
To ensure that victims of securities fraud will have recourse, NASAA is calling on Congress to explore amending federal law to ensure that all investors, especially those investing small amounts, have a reasonable avenue to seek recovery.
"It is disappointing that the Supreme Court would turn a blind eye to the injustice of allowing large corporate interests to deny small businesses and individuals their day in court," Abshure said. "It is now up to Congress to restore some vestige of consumer protection by prompt remedial legislation to restore the scales of justice to balance."
"Arbitration should not be the sole forum available to aggrieved investors. They should be able to seek relief in any forum and not be forced into an expensive arbitration that could foreclose the ability to obtain relief," Abshure said.