Is FINRA Becoming More Investor-Friendly?

In our experience, most of the investors we speak with have never heard of FINRA (Financial Industry Regulatory Authority, the securities’ industry watchdog arm of the Securities Exchange Commission)--until something goes wrong with their investments or their financial advisor. Even fewer know about the FINRA arbitration process. But they should. Because, for the vast majority of investors, whether they realize it or not (most don’t), when they first opened an investment account with a full-service or even discount brokerage firm, they signed a Binding Arbitration Agreement that forces them, in the event of problems with their brokerage or broker, to resolve these problems not in a court of law but through FINRA’s arbitration process. For a more detailed look at the arbitration process itself, please visit our page dedicated to this topic.

Interestingly, this arbitration process that very few investors are aware of is currently undergoing two major changes that might help shift the balance away from what many perceive to be a securities industry bias to more sensitivity and protections for the consumer/customer/investor.

Recently, FINRA’s board of governors approved a rule that would ban settlements in customer disputes that require investors to release their right to oppose the expungement of complaints from brokers’ public records. In other words, FINRA is trying to prevent brokers who settle with customers from erasing all traces of what happened. This would certainly seem to be a good thing for investors.The second measure would make it harder for Wall Street lifers to act as arbitrators in securities disputes. Again, investors would definitely seem to benefit from a reduction in the perceived bias of the arbitration process. After all, if you’re an investor who just lost his or her life-savings and you take action against your broker, the last thing you’d like to see in front of you when it comes to making your case is a three-person panel made up of ex-brokers.

Needless to say, we applaud these measures. We only hope that the SEC, which must first approve them before they are put into action, will see it our way--and yours.

If you or anyone you know has been the victim of broker misconduct or investment fraud, please contact us immediately at 1-855-462-3330 or via email by clicking here.