Plaintiff sustained a severe loss in the resale of securities bought from the defendant. Alleging fraud he sued under section 12(2) of the Securities Act of 1933, which provides for liability when prospectuses or oral communications sent through channels of interstate commerce falsely state or omit a material fact so as to render the statement misleading. Pursuant to the Federal Arbitration Act, defendant moved for an order staying proceedings until arbitration had been had in accordance with an agreement between the parties. The district court denied the order, saying that the non-waiver clause of the Securities Act voided a waiver of remedies. The court of appeals reversed the decision, holding the non-waiver clause applicable only to mandatory provisions of the act. On certiorari, the Supreme Court held, reversed, two justices dissenting. Arbitration, with its informal procedure, would not assure the plaintiff the benefit of being relieved from proving scienter. In view of the unequal positions of the parties in transactions involving securities, and the imposing array of remedies which the Securities Act specifically provides for the buyer, the policy of the statute is better served by avoiding an arbitration agreement under the non-waiver clause, despite the broad language of the Arbitration Act. Wilko v. Swan, 346 U.S. 427, 74 S.Ct. 182 (1953).
Rinaldo L. Bianchi,
ARBITRATION-ENFORCEABILITY OF ARBITRATION AGREEMENT IN ACTION BY INVESTOR UNDER THE SECURITIES ACT OF 1933,
Mich. L. Rev.
Available at: https://repository.law.umich.edu/mlr/vol52/iss5/8