Pre-dispute Arbitration Agreements
If a customer account includes a pre-dispute arbitration agreement, additional procedures must be followed. Upon signing this type of agreement, a customer agrees to settle any disputes with the dealer by arbitration and to give up the right to sue in court.
Any pre-dispute clause must be immediately preceded by the following language in outline form:
This agreement contains a pre-dispute arbitration clause. By signing an arbitration agreement the parties agree as follows:
• All parties to this agreement are giving up the right to sue each other in court, including the right to a trial by jury, except as provided by the rules of the arbitration forum in which a claim is filed.
• Arbitration awards are generally final and binding: A party’s ability to have a court reverse or modify an arbitration award is very limited.
• The ability of the parties to obtain documents, witness statements, and other discovery is generally more limited in arbitration than in court proceedings.
• The arbitrators do not have to explain the reason for their award.
• The panel of arbitrators will typically include a minority of arbitrators who were or are affiliated with the securities industry.
• The rules of some arbitration forums may impose time limits for bringing a claim in arbitration. In some cases, a claim that is ineligible for arbitration may be brought in court.
• The rules of the arbitration forum in which is the claim is filed, and any amendments thereto, shall be incorporated into this agreement.
In addition, any agreement containing a pre-dispute arbitration clause must include a highlighted statement right before the signature line indicating its presence in the agreement. The statement must indicate the page and paragraph where the arbitration clause is located. Within 30 days of signing, the dealer must provide the customer with a copy of the agreement containing the pre-dispute