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August 12, 2020

A Win for Investors: The Fourth Circuit Sides with Better Markets, Holding That Brokers Can Be Held Accountable in Arbitration for Violating Their Own Rulebook

August 12, 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 Fourth Circuit decision upholding an arbitration award in favor of investors harmed by a broker’s rule violations in Interactive Brokers LLC v. Saroop.
“Today’s decision from the Fourth Circuit removes technical legal barriers that stand in the way of recovery by investors already facing an uphill battle in arbitration. Reflecting a core argument that we advanced in our amicus brief, the court held that where an arbitration agreement clearly incorporates a set of rules governing broker conduct (in this case, the FINRA rulebook), an arbitration panel may award damages based on violations of those rules and breach of contract principles. 
“The appellate court rightly rejected the hyper-technical and erroneous contention that violations of those rules can never support a ‘private right of action’ in court or in arbitration. And the court clearly appreciated the need to avoid saddling investors with even more burdensome and costly requirements in arbitration. As the majority explained at the conclusion of their opinion, ‘without appropriate deference to arbitrators, the costs of vindicating rights drastically increase, threatening to foreclose yet another avenue of relief for ordinary consumers who routinely enter contracts with mandatory arbitration provisions. The modified award must be confirmed.’
“The decision is especially significant given the enormous challenges that investors have long faced in achieving full and fair recovery for broker misconduct in arbitration. It’s a system run by the brokerage industry; it’s forced on investors without their consent; awards usually fall well short of investors’ damages; and the process is secretive, typically resulting in brief orders without much explanation. But it’s at least supposed to be informal and less expensive than litigation. Even that isn’t always true, but fortunately the Fourth Circuit today rightly perceived the need to avoid erecting even more obstacles against investors.”
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
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