The Supreme Court has reaffirmed its stance that the arbitration forum is the proper venue for deciding brokerage cases. The high court recently ruled unanimously that an arbitration forum—not a court—will decide when a claim against a brokerage firm is too late to be dealt with through arbitration.
In the case, "Howsam v. Dean Witter," the justices wrote that matters such as statute-of-limitation rules should be determined by the arbitrators, for they are "comparatively more expert about the meaning of their own rule, are comparatively better able to interpret and to apply it."
Dean Witter, now Morgan Stanley, disagreed with the court’s decision, arguing that because the dispute was more than six years old, it was "not eligible for arbitration."
For the industry, this ruling simply affirms that courts would prefer to have claims involving brokerage firms decided by arbitrators. In the agreement between Karen Howsam and Morgan Stanley, a provision stipulated that all controversies shall be decided by arbitration, and that Howsam can select the forum. She chose the NASD. To read the Court's opinion, click here.