Securities Dispute Resolution Law and Legal Definition

Dispute resolution methods, including mediation and arbitration, are non-judicial processes for settling disputes between two or more parties. In the securities industry, mediation and arbitration are the most common processes. Litigation is extremely uncommon. This is due to the court decision in Shearson/American Express, Inc. v. McMahon, 482 U.S. 220, 107 S.Ct. 2332 (1987), where the court authorized the use of arbitration for the settlement of disputes relating to the securities industry. Additionally, SEC Rule 12 provides for arbitration of “any dispute, claim or controversy between parties… arising in connection with the securities business of such parties.” Since then, most New Account Agreements include an arbitration clause that refers the matter to arbitration.