490 U.S. 477 (1989)
When petitioners invested funds with a broker, they signed a contract agreeing to arbitrate all disputes. When petitioners lost their money, they filed claims against a broker and respondent alleging, inter alia, claims under § 12(2) of the Securities Act of 1933 (Act), 15 U.S.C.S. § 771(2). The district court ordered all claims except the § 12(2) claims into arbitration, and the appellate court ordered those claims into arbitration as well.
- On certiorari, the court overturned the decision in Wilko v. Swan, 346 U.S. 427, which construed § 14 of the Act to prohibit arbitration.
- The court held that § 14 of the Act prohibited the waiver of any of the substantive provisions of the Act.
- However, the provisions of the Act which granted venue to federal courts was procedural, rather than substantive.
- Thus, the arbitration clause in the investment contract did not waive any of the substantive provisions of the Act. The court affirmed the judgment of the appellate court.
The court affirmed the order because arbitration was favored by federal law and because arbitration did not affect the substantive provisions of the Securities Act of 1933, but was a procedural remedy only. The court overruled its prior decision prohibiting arbitration, on the basis that the prior decision was incorrectly decided, and the rationale for that decision no longer applied.
Suggested Study Aids For Securities Regulation Law
Securities Regulation in a Nutshell, 10th (Nutshell Series)
Securities Regulation: Examples & Explanations, 5th Edition
Securities Regulations: The Essentials