ISDA Agreement Litigation
The ISDA (International Swaps and Derivatives Association) Master Agreement is typically used between a derivatives dealer and their counterparty in connection with a derivatives trade. The Master ISDA agreement has become the standard form contract used by institutions to trade complex derivative and swap transactions with each other. In recent years, brokerage firms have used these extraordinarily complex agreements with less sophisticated retail investors. While useful in facilitating such institutional trading, such agreements are subject to abuse when they purport to document legal rights, disclose risks and confirm suitability when the complex products that they govern are sold by brokerage firms to non-institutional investors who may have little or no understanding of this highly complex, mathematically dense and lengthy agreement. The ISDA agreement is readily tailored by financial firms to limit investors’ rights with limited disclosure. Investments subject to ISDA agreements are often unsuitable for less sophisticated investors, and therefore subject to challenge through the FINRA arbitration process.