Arbitration an ‘excellent’ tool for securities disputes

By Rob Lamberti, Contributor

Commercial arbitration in securities disputes can be the quickest and most cost-effective way to settle disagreements, says Toronto litigator and commercial arbitrator Marvin Huberman.

The process, that is final and binding, can be used in lieu of what could be a lengthy and costly showdown in court, says Huberman, editor of A Practitioner’s Guide to Commercial Arbitration.

"I see tremendous potential to resolve disputes through arbitration with efficiency, fairness and being more sensitive to satisfactory outcomes than traditional litigation," he tells

"The question,” he says, “is which cases are appropriate for this?"

Huberman says he's a proponent of arbitration in the securities dispute resolution arena. He also serves as arbitrator in Canada and in the United States, including with the Investment Industry Regulatory Organization of Canada (IIROC), and the Financial Industry Regulatory Authority (FINRA), a not-for-profit authorized by Congress to oversee the broker-dealer industry.

The commercial arbitration process is not as constricting as it is with labour disputes, he says.

"It's different than labour, where you have a three-person panel and one member is from labour, one from management and with a neutral chair," he explains.

"Not so in commercial arbitration. For domestic cases, you normally have one arbitrator,” Huberman says.

"With FINRA matters, there are three arbitrators but there's more flexibility in commercial arbitration in who you pick and the procedures that are used. You can waive a great deal, you can create your own, and not be stuck on established procedures and legislated provisions," he says.

IIROC is the securities' sector's self-regulatory organization in Canada. As an arbitration board member, he's been involved in disputes between member firms and their clients in matters of up to $500,000.

"It sets high-quality investment standards, it protects investors and strengthens market integrity while maintaining an efficient and competitive capital market," Huberman says.

He says IIROC also offers three other options for conflict resolution: ombudsman services are provided for banking and investments; voluntary mediation for Quebec residents; and assistance in the litigation process.

Generally, the idea of arbitration is that one person or panel makes a decision fairly and efficiently — and it’s going to be final and binding, Huberman says.

"That's the end of it. Shake hands and go home. In court, you have two or three levels of appeal, years of waiting and so on,” he says. "If done right, commercial arbitration, particularly in securities disputes, have a tremendous potential for being an excellent dispute resolution mechanism."

As a panel member with ADR Chambers, an alternative dispute resolution firm that is part of the IIROC program, Huberman says, "In Canada, I've done many arbitrations under ADRC IIROC, which would give member companies across the country an alternative to litigation to resolve their disputes."

Huberman says the right method of dispute resolution must consider what he calls the three Ps: the people, the problem and the process.

He says once those variables are considered, "That increases the chances of maximizing the goals of alternative dispute resolution, including arbitration, which is having a faster, cheaper and better resolution process than traditional adversarial litigation in court."

In securities-related disputes, he's "a big fan of mediation and if it works, that's great."

But if it doesn't, he recommends arbitration to solve the dispute.

Huberman was approved this month to be a FINRA arbitrator in the Buffalo, N.Y., area.

"They provide mediation and arbitration processes to settle securities-related disputes," he says. "My name is now on a list of public arbitrators for FINRA and if I'm picked and I am available, I would serve on a three-person panel to decide disputes between the client and the broker."

The American arbitration scenario could include disputes filed within six years of the event involving investors and brokers, investors and brokerage firms, and investors and brokers and firms, Huberman says.

Arbitration hearings could also involve disagreements at the industry level, such as brokerage firms and brokers.

He says there has been some criticism that the process has been used unfairly by one party over another and became as expensive as court, but Huberman's view is that each case should be designed to effectively manage the dispute.

If not, he warns the arbitration process could get out of hand and end up being "a horrible experience, even worse than court litigation in certain instances.”

"It's all about tailor-making the arbitration process as best as you can by having a strong arbitrator or panel of arbitrators collaborating with the parties to meet their needs and objectives," he says.

"If you do it that way, then you could have a very effective, fair and efficient way of resolving the dispute."

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