The U.S. Constitution is an amazing document; “the law of the land.” While people point to the U.S. President as our counterpart to the kings and queens of other countries, that’s not accurate. Our king, if we can be said to have one, is the Constitution. Our chief executive swears his allegiance to it upon taking office. It has given us one of the world’s longest surviving republics. The remarkable men who drafted the document enshrined certain rights of individuals in the first ten amendments to the Constitution. Among those fundamentals rights was the right to a jury in civil trials, enshrined in the Seventh Amendment, which provides:
In Suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved, and no fact tried by a jury, shall be otherwise re-examined in any Court of the United States, than according to the rules of the common law.
The securities industry will not do business with you unless you agree to waive that right. In place of the fundamental right for which our founding fathers risked “life, liberty, and [their] sacred honor,” the securities industry gives you a hearing in an arbitration forum run by the industry that caused your losses. I wonder what John Adams would say. It might be something similar to what William D. Cohan said in a recent blog post on Bloomberg View.
At a time in history when investors need access to justice more than ever before, the securities industry keeps the doors of the courthouse closed. No doubt, arbitration has its place and ought to be preserved for those who prefer it over litigation in court. But, requiring the surrender of Seventh Amendment rights as the price of admission to American securities markets is wrong.