## Facts

- Anthony Wilko purchased 1,600 shares of Air Associates, Inc. through Hayden, Stone & Co., a securities brokerage partnership.
- Wilko alleged the brokers induced the purchase through interstate commerce by misstating material facts about a prospective merger and speculative buying interest, and by failing to disclose that an Air Associates director and counsel was selling stock, including stock sold to Wilko.
- Wilko sued in federal court under Securities Act of 1933 § 12(2) seeking damages for misrepresentation in the sale of securities.
- The brokerage firm sought to stay the action under Federal Arbitration Act § 3 based on a margin agreement clause requiring arbitration of “all future controversies.”
- The district court denied the stay; the court of appeals reversed and ordered arbitration; the Supreme Court granted review.

## Issues

1. Whether a predispute broker-customer arbitration clause is a void “condition, stipulation, or provision” under Securities Act § 14 because it binds a purchaser to waive compliance with the Act.
2. Whether Securities Act § 22(a)’s grant of a judicial forum is a statutory “provision” that cannot be waived in advance, notwithstanding the Federal Arbitration Act.

## Decision

- The Supreme Court reversed and held the predispute arbitration agreement unenforceable for the § 12(2) claim.
- The Court held the arbitration clause was a “stipulation” that bound the purchaser to waive compliance with the Securities Act, and was therefore void under § 14.
- The Court treated the purchaser’s ability under § 22(a) to select a judicial forum as a statutory entitlement that could not be contractually surrendered in advance.
- The Court concluded the Federal Arbitration Act’s general pro-arbitration rule did not override the Securities Act’s specific anti-waiver command.

## Legal Principles

- Securities Act § 14 voids contractual terms that bind a security purchaser to waive compliance with any statutory provision of the Act.
- For § 12(2) misrepresentation claims, a predispute agreement requiring arbitration of future disputes operates as an impermissible advance waiver of the Act’s remedial scheme.
- Securities Act § 22(a) confers a statutory right to a judicial forum selection that, under § 14, cannot be waived by a predispute arbitration clause.
- When a specific federal statute bars waiver of statutory rights, that limitation controls over the Federal Arbitration Act’s general enforcement policy.

## Conclusion

The Court held that a standard margin agreement’s predispute arbitration clause could not be enforced to compel arbitration of a Securities Act § 12(2) claim because Securities Act § 14 invalidated advance waivers of the Act’s protections, including the purchaser’s statutory entitlement to pursue the claim in a judicial forum under § 22(a).


Wilko v. Swan, 346 U.S. 427 (1953)