If you have a beef with your broker and you go to arbitration, you’ll be less likely to win. And if you do come out a victor, the amount you recover won’t be nearly as much as you wanted, according to an analysis of about 14,000 New York Stock Exchange and National Association of Securities Dealers arbitration cases.

Investors working with a broker or brokerage firm often are required to sign an agreement that if a dispute arises, they have to take their case to arbitration. In such a case, the broker or firm must use an arbitration process set up and run by industry regulators.

In examining this process, the authors looked at a period from 1995 to 2004. They found that the victory rate for investors in securities arbitration cases dropped from a high of 59 percent in 1999 to 44 percent in 2004.

When it came to their claims for damages, investors were awarded 22 cents on the dollar in 2004 (as a percentage of the amount claimed) compared with a high of 38 cents on the dollar in 1998. (Ninety percent of the cases reviewed went through the NASD arbitration process.)

The recovery percentage plunged to 12 percent for claims of more than $250,000. The larger the award and the bigger the brokerage firm, the smaller the recovery, according to the study conducted by Daniel R. Solin, a securities arbitration attorney and registered investment adviser with Index Funds Advisors, and Edward S. O’Neal, a principal with Securities Litigation and Consulting Group Inc.

“This study paints an alarming picture of a steadily worsening situation for investors who have no alternative to securities arbitration administered by the very industry that they are suing,” said Solin, author of “The Smartest Investment Book You’ll Ever Read.”

On the contrary, said Linda Fienberg, president of NASD Dispute Resolution, the arbitration process is fair to investors. NASD is the private-sector regulator of the securities industry.

“In most cases you will get as good a deal than if you went to court,” Fienberg said. “You will get an award a lot faster, and it is cheaper.”

Under the NASD arbitrator selection rules, both sides in the dispute get to select the arbitrators. An automated process generates lists of potential arbitrators. Both sides are allowed to strike individuals from the panel. They get background information about the arbitrators, including a history of the arbitration awards they have made. The New York Stock Exchange has a similar system.

Large arbitration cases of $50,000 or more are decided by a three-person panel, two of whom are individuals referred to as “public arbitrators,” Fienberg said. The two public arbitrators cannot be associated or employed by a broker/dealer or securities firm. They cannot have any family connections to an industry insider. However, the third panelist is selected among a list of people who either are working in the industry or who have ties to the industry.

“The arbitration rules insist on a stacked tribunal,” Solin said. “It would be one thing if these were all just theoretical concerns, but today we know they are very real problems that result in aggrieved investors getting little justice when they need it most.”

Fienberg criticized Solin and O’Neal’s study, arguing that it is misleading. For example, she noted, it doesn’t take into account that more than 70 percent of cases are settled before they reach arbitration.

Further, Fienberg said, comparing losses initially claimed to the monetary damages ultimately awarded doesn’t accurately reflect what might have happened during the arbitration process. During the process, an investor may voluntarily reduce his or her claim, she said.

Certainly the authors of this study aren’t unbiased. Solin represents investors in large cases against major brokerage firms. O’Neal’s firm provides expert witnesses to law firms.

Still, the two have a valid point in questioning the practice of allowing industry insiders to decide on arbitration cases.

In light of all the recent investment scandals, investors are entitled to a panel of arbitrators with no connections whatsoever to the securities industry.

Fienberg said it helps to have someone on the arbitration panel who is familiar with industry practices. I understand that reasoning.

But the standard should be to avoid even the appearance of partiality.