Skip to main content


May 29, 2020

Will the Fourth Circuit Protect Investors’ Rights to Recover for Broker Misconduct or Make a Flawed Arbitration System Even Worse? Argument Is Set for May 29, 2020

May 29, 2020
Contact: Pamela Russell at 202-618-6433 or
Washington, D.C.  –  Stephen W. Hall, Legal Director and Securities Specialist for Better Markets, issued the following statement on today’s oral argument in the U.S. Court of Appeals for the Fourth Circuit in a case that will determine whether injured investors can hold brokers accountable for violating their own rule book, Interactive Brokers LLC v. Saroop.
“We know that mandatory arbitration is a flawed system for a host of reasons: It’s forced on investors without their consent; it’s run by the brokerage industry; the awards usually fall well short of investors’ damages; and the process is secretive, usually resulting in terse orders without much explanation. But it’s at least supposed to be informal. Arbitration agreements almost always provide that investors can assert any type of claim against their broker and they don’t have to craft technical legal theories or be wary of legal traps.
“The Interactive Brokers case is important because it casts even this basic principle in doubt. The claimants won a sizeable arbitration award after their broker violated a FINRA rule intended to protect investors from high-risk trading practices. FINRA, a self-regulatory organization or SRO, is made up of brokerage firms, and along with the Securities and Exchange Commission, oversees broker conduct. Yet a federal district court threw out the award, claiming that such SRO rules are not enforceable by private parties. But that’s not the law, as the parties’ agreement controls in arbitration, and in this case, their agreement allowed for all claims to be arbitrated. And over the years, SRO rule violations have served as the basis for awards in arbitration and in some federal courts as well.
“The Fourth Circuit has a chance to correct the lower court’s errors and it should as we argued in our amicus brief and fact sheet. Otherwise, a bad arbitration system will get even worse. All sorts of misconduct that’s prohibited under the FINRA rule book will be out of bounds in arbitration, leaving many investors without an adequate remedy. The arbitration process will become more and more like litigation, including a surge in judicial challenges to arbitration orders filed by brokers, imposing costs and burdens that weigh on investors far more than on well-heeled brokers. We hope to glean some positive signs from the oral argument, and we’ll be looking for the decision on the merits down the road.”
Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies – including many in finance – to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit
Press Releases


For media inquiries, please contact us at or 202-618-6433.

Contact Us

For media inquiries, please contact or 202-618-6433.

To sign up for our email newsletter, please visit this page.

This field is for validation purposes and should be left unchanged.

Sign Up — Stay Informed With Our Monthly Newsletter

This field is for validation purposes and should be left unchanged.

For media inquiries,

please contact or 202-618-6433.


Help us fight for the public interest in our financial markets, protecting Main Street from Wall Street and avoiding another costly financial collapse and economic crisis, by making a donation today.

Donate Today