As part of the Dodd-Frank Wall Street Reform Act, Congress has given the Securities and Exchange Commission the authority to prohibit or impose conditions upon the use of pre-dispute arbitration agreements by brokerage firms and federally registered investment advisors in their customer agreements.

FINRA arbitration is a completely different process than most consumer arbitration procedures, but has its own chorus of criticism. There are nagging comments about poor decisions and clients being denied the right to a trial by jury, as well as arbitrators who don't pay attention during hearings, aren't inexperienced and side with firms to get more work.

FINRA's arbitration process is not perfect. Far from it. But the reality is that the process is at least as fair as any court proceeding and offers significant cost savings for all parties. One issue is the effect that a potential ban of pre-dispute arbitration agreements would have on FINRA Rules 12220 and 13200.

Consider Rule 12220, which requires firms, and their individual brokers, to arbitrate all disputes at the request of a customer. Then there is Rule 13200, which requires firms and registered individuals (not just brokers) to arbitrate their disputes.

Putting aside the constitutional issues involved in a government agency attempting to overrule the courts and Congress, if the SEC bans pre-dispute arbitration agreements for customers, it will also need to strike FINRA Rule 1220, or it will have created a one-way choice option for investors, with no choice for firms and brokers.

If the critics of pre-dispute arbitration agreements are correct, and arbitrators are in fact biased in favor of the firms, or inexperienced, or don't listen to the complaints, isn't it also true for the employees of the brokerage firms? Aren't they subjected to the same biases when they arbitrate against the brokerage firms? And don't they, as individuals, have the right to have their case hear in court, by a judge and jury?

There cannot be any serious debate that individual brokers are in the same place as individual investors, if you give credence to the critics of the arbitration process. Then, not only must the SEC strike Rule 12200, it must also strike Rule 13200.

The argument in favor of investor choice is more compelling than broker choice. Investors, in theory, have a choice-do not invest through a brokerage firm that uses a pre-dispute arbitration agreement.

Brokers do not have a choice. If you want to work in the brokerage industry, in a registered capacity (which includes hundreds of thousands of people who are not brokers) you must arbitrate your employment disputes. And, the employee is required to do so-not because he signed an agreement- but rather because the SEC has approved a FINRA rule which requires all licensed individuals to arbitrate disputes with their customers and their employers.

The mandatory nature of the arbitration "agreements" that bind brokers are more outrageous than the pre-dispute arbitration agreements, because the mandatory nature of those pacts exists by a government rule, not a private agreement.

It remains to be seen what, if anything, the SEC does.

But if it prohibits arbitration agreements for investors, it surely must apply the same logic to FINRA rules which require employees to arbitrate their disputes.