FINRA Proposal on Unpaid Arbitration Awards Not Good Enough
The Financial Industry Regulatory (FINRA) Administration Proposal will open the window for investors to exit the arbitration process the moment a broker or a brokerage firm leaves business while an arbitration is pending in court.
According to the president Samuel Edwards, the president of the public investors advocate bar association (PIABA), the proposed amendments are not good enough for aggrieved investors to have options to file for proceedings and makes claims in court against rogue financial advisors. He further stated however that this kind of change might help the unsolved long-lasting issues of unpaid and un-honored arbitration awards. Through the research made in 2016 by the PIABA study, of all the money awarded in 2013 arbitrations, over 25% of it went unpaid.
Advantages to investors
PIABA support the proposed amendment because in certain instances it is advisable for an investor to pursue a default proceeding against an inactive member or persons who are no longer members of the association, in a state and obtain a judgment, rather than going through an arbitration process. This also gives room to sue some respondents by the customer claimant.
Obligatory notices to investors
In light of these changes, notices of inactiveness of members of FINRA must be sent to the claimant within 60 days and upon receiving the notice to improve their litigation strategy and for them the option of whether or not they want to pursue the claim or not without prejudice.
He also added that the proposed amendment will also give room to the claimant to unilaterally postpone a hearing without a penalty from the FINRA. Notwithstanding the postponement, Arbitrators will be paid their postponement honoraria by the FINRA instead of the claimant and the claimant will be refunded for his or her filing fee if the notice is brought within 10 days of the slated. The PIABA is in support of this proposal by FINRA.
FINRA Must Go Further to Protect Investors in Arbitration
According to Edwards, the amendment is crucial given that customers are permitted to pursue claims against respondent when inactive members may not have any assets. However, there is no provision in the FINRA’s arbitration rules stating a remedy where a broker or brokerage firm or its representatives close business while arbitration is ongoing.
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