Regulators say that a study released today demonstrates the need to improve the US securities arbitration system, but industry lobbyists dispute that conclusion.

Following the release of a survey of participants in NYSE and NASD arbitrations by the Securities Industry Conference on Arbitration, the North American Securities Administrators Association called upon the Financial Industry Regulatory Authority and the Securities and Exchange Commission to take immediate action to improve the fairness of the system of securities arbitration, beginning with the removal of the mandatory industry representative from arbitration panels used to resolve securities disputes involving customers and industry.

“The study overwhelmingly demonstrates that investors view the securities arbitration forum as biased and unfair,” said Karen Tyler, North Dakota Securities Commissioner and president of NASAA.

NASAA reported that the SICA study shows: nearly half of the customers who expressed their views believed their arbitration panel was biased; 62% believed the arbitration process was unfair; 70% were dissatisfied with the outcome; 49% stated that the arbitration process was too expensive; and, 75% of customers who compared their arbitration process to their civil litigation process indicated that arbitration was “very unfair” or “somewhat unfair” compared to court.

“The SICA study’s results are disturbing, and they support what state regulators have been hearing from investors in their states – investors believe that the arbitration forum they are forced to participate in is rigged against them,” said Bryan Lantagne, director of the Massachusetts Securities Division and chair of NASAA’s Arbitration Project Group.

However, the Securities Industry and Financial Markets Association called the survey, “a mixed bag”. Ira Hammerman, senior managing director and general counsel of SIFMA, said, “It’s hard to know what to conclude when so few people responded, and of those who did, the large majority admitted they had no arbitration hearing experience, but proceeded to answer questions as if they did.”

Added Hammerman, “Poor process controls also resulted in at least 1,500 participants receiving two or more copies of the survey. As a result, we are left with a survey whose results are middling, questionable and thus, unlikely to lead us to greater truths.”

NASAA’s Lantagne insisted that, “The study is sound and accurate… The study’s responses were compiled in a scientific manner, which provided a factual foundation for its results.”