Mandatory ADR in Emerging Equity Market: Adequacy Assessment and Institutional Design in the Philippines

Abstract

Mandatory alternative dispute resolution (ADR) is increasingly proposed in emerging capital markets to strengthen investor protection. Its legitimacy depends not on compulsion but on whether the forum is credible, accessible, and its outcomes enforceable. This article assesses the Philippine framework for investor–broker and broker–broker disputes against five criteria drawn from the financial ADR literature: procedural efficiency, accessibility, neutrality, enforceability, and investor-protection alignment. It uses an exploratory sequential mixed-methods design: ten semi-structured interviews with market and regulatory professionals; a survey of 50 respondents yielding eleven composite constructs; and doctrinal and comparative analysis of FINRA and Malaysia’s Financial Markets Ombudsman Service. The framework fails on efficiency, accessibility, and neutrality, and only partially satisfies enforceability and investor-protection alignment. The interviews identify an enforcement–legitimacy gap: anticipated enforcement difficulty weakens confidence in redress before a dispute is pursued. Respondents prioritize independence from the exchange and its surveillance arm over faster judicial confirmation, inverting the conventional reform sequence. Principal component analysis identifies a dominant orientation accounting for 62.5 per cent of variance, suggesting respondents view reform as an integrated package rather than separable measures, though not that any measure would succeed. Support is strongly conditioned on bounded scope, with regulatory and criminal matters excluded. The article proposes a Capital Markets Arbitration Centre, pursued through parallel regulatory and legislative tracks, with an aggregate disclosure model reconciling arbitral confidentiality with the continuing obligations of listed issuers.