Judge Rules on Calif. Broker Case
SAN JOSE, Calif. (AP) _ California investors cannot arbitrate claims against securities brokerages under the state’s arbitration rules, a federal judge ruled Tuesday.
U.S. District Judge Jeremy Fogel ruled that disputes between California investors and their brokerages must be settled under federal arbitration standards governed by the New York Stock Exchange or the National Association of Securities Dealers.
Brokerage contracts generally require that investor complaints be handled through federal arbitration rules, not litigation.
Adopted last year, California’s ethical standards demand arbitrators disclose more personal information about their financial ties than federal rules.
The decision, if it stands, could be a step toward ending a growing controversy. Because the state’s arbitration standards conflicted with rules by the stock exchange and securities association, hundreds of claims by California investors seeking the protection of California’s rules have been delayed.
The case concerned Richard Mayo, a California man who alleged Morgan Stanley Dean Witter & Co. should return $20,000 that he says was wrongly removed from his account. He sought to arbitrate the case under California standards, but Fogel said federal rules trumped California’s.
Mayo’s attorney, William Kennedy, said he was mulling an appeal.
Morgan Stanley attorney Sarah Good said the company was ``pleased Mr. Mayo’s claims are going to be submitted to arbitration in accordance with the parties’ contract.″