Attorneys who practice in the arbitration system are presently in doubt as to whether arbitrators will base their award on commercial equitable judgment or on a strict adherence to legal precedence. The article first examines federal case law on the issue of extent to which arbitrators must follow the letter of the statutory law and the common law. It finds the “manifest disregard” doctrine enunciated in the Bobker decision has been subjected to several different interpretations. Examining the pros and cons of these various interpretations from the point of view of industry practicalities, the author finds that the arbitrators need clearer direction in reaching their decisions and concludes that it is up to the SROs to develop guidelines for the arbitrators to follow.
David A. Lipton, The Standard on Which Arbitrators Base Their Decisions: The SRO’s Must Decide, 16 SEC. REG. L. J. 3 (1988).