The second argument offered by the McMahons is that the arbitration agreement effects an impermissible waiver of the substantive protections of the Exchange Act. Ordinarily, "[b]y agreeing to arbitrate a statutory claim, a party does not forgo the substantive rights afforded by the statute; it only submits to their resolution in an arbitral, rather [482 U.S. 220, 230] than a judicial, forum." Mitsubishi Motors Corp. v. Soler-Chrysler-Plymouth, Inc., 473 U.S., at 628 . The McMahons argue, however, that 29(a) compels a different conclusion. Initially, they contend that predispute agreements are void under 29(a) because they tend to result from broker overreaching. They reason, as do some commentators, that Wilko is premised on the belief "that arbitration clauses in securities sales agreements generally are not freely negotiated." See, e. g., Sterk, Enforceability of Agreements to Arbitrate: An Examination of the Public Policy Defense, 2 Cardozo L. Rev. 481, 519 (1981). According to this view, Wilko barred enforcement of predispute agreements because of this frequent inequality of bargaining power, reasoning that Congress intended for 14 generally to ensure that sellers did not "maneuver buyers into a position that might weaken their ability to recover under the Securities Act." 346 U.S., at 432 . The McMahons urge that we should interpret 29(a) in the same fashion.
We decline to give Wilko a reading so far at odds with the plain language of 14, or to adopt such an unlikely interpretation of 29(a). The concern that 29(a) is directed against is evident from the statute's plain language: it is a concern with whether an agreement "waive[s] compliance with [a] provision" of the Exchange Act. The voluntariness of the agreement is irrelevant to this inquiry: if a stipulation waives compliance with a statutory duty, it is void under 29(a), whether voluntary or not. Thus, a customer cannot negotiate a reduction in commissions in exchange for a waiver of compliance with the requirements of the Exchange Act, even if the customer knowingly and voluntarily agreed to the bargain. Section 29(a) is concerned, not with whether brokers "maneuver[ed customers] into" an agreement, but with whether the agreement "weaken[s] their ability to recover under the [Exchange] Act." 346 U.S., at 432 . The former is grounds for revoking the contract under ordinary [482 U.S. 220, 231] principles of contract law; the latter is grounds for voiding the agreement under 29(a).
The other reason advanced by the McMahons for finding a waiver of their 10(b) rights is that arbitration does "weaken their ability to recover under the [Exchange] Act." Ibid. That is the heart of the Court's decision in Wilko, and respondents urge that we should follow its reasoning. Wilko listed several grounds why, in the Court's view, the "effectiveness [of the Act's provisions] in application is lessened in arbitration." 346 U.S., at 435 . First, the Wilko Court believed that arbitration proceedings were not suited to cases requiring "subjective findings on the purpose and knowledge of an alleged violator." Id., at 435-436. Wilko also was concerned that arbitrators must make legal determinations "without judicial instruction on the law," and that an arbitration award "may be made without explanation of [the arbitrator's] reasons and without a complete record of their proceedings." Id., at 436. Finally, Wilko noted that the "[p]ower to vacate an award is limited," and that "interpretations of the law by the arbitrators in contrast to manifest disregard are not subject, in the federal courts, to judicial review for error in interpretation." Id., at 436-437. Wilko concluded that in view of these drawbacks to arbitration, 12(2) claims "require[d] the exercise of judicial direction to fairly assure their effectiveness." Id., at 437. |
