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Most disputes between customers and their brokerage firms are resolved through arbitration as a result of the Supreme Court's holding in Shearson/American Express, Inc. v. McMahon. McMahon was part of two larger trends of the Supreme Court: the Court's general pro-arbitration trend and its efforts to remove private securities fraud claims from federal court. Many investor advocates viewed McMahon as anti-investor, a view that continues to have support today.

This is an assessment of the current securities arbitration process from the perspective of an investor advocate. In my view, investors may fare better in arbitration than in litigation. Accordingly, the trend to transform securities arbitration into a more judicial process may not be advantageous to investors. There are additional reasons to be concerned about the securities arbitration structure created in response to McMahon in light of the proliferation of securities arbitration claims and the demands they place on the current system. In addition, this article addresses the special concerns of the small claims investors.