Unfortunately, for what is a substantial percentage of claimants who win arbitration awards against their brokers and/or their brokerage firm, FINRA has declined to address an all to common situation that investors face – that of unpaid arbitration awards.

Last week, FINRA’s governing board failed to significantly address the problem of unpaid arbitration awards that has faced investors for years, if not decades.  Rather, FINRA only took the extremely small step of permitting investors in certain cases to take their claims to civil court, notwithstanding any binding arbitration agreement the client may have signed (FINRA may also suspend from the industry individuals and firms who do not pay arbitration awards; this procedure has been in place for some time).

The Public Investors Arbitration Bar Association (PIABA) conducted a study of unpaid arbitration awards. In a press release dated February 25, 2016, PIABA revealed that in 2013 one in three investor arbitration awards went unpaid. In 2013, according to PIABA’s study, $62.1 million in investor arbitration awards went unpaid.

PIABA is seeking the creation of a “National Recovery Pool.” This fund, argues PIABA, should be financed by small annual surcharges on the nation’s 600,000 brokers (PIABA suggests a fee of $100 per year). Alternatively, PIABA argues that FINRA could direct to the National Recovery Pool a portion of the millions of dollars it refunds to its membership annually.

According to FINRA, it is continuing to study this problem and views unpaid arbitration awards as “a priority.” FINRA indicated that they are developing additional proposals and that “there is more to come in this area.”

Permitting aggrieved clients who are suing brokers or firms who are out of business and/or on the verge of bankruptcy to take their claims to court does almost nothing to address the problem facing these clients – brokers and brokerage firms with no assets.  PIABA is extremely disappointed and feels that they will have to seek out a legislative solution to the problem.

For you, as an investor, it points to the fact that if you feel your broker has mishandled your account, you are probably not alone, and you should immediately seek the assistance of experienced counsel and get your place in line not to get paid.

Nicholas J. Guiliano has over twenty years experience representing investors before the Financial Industry Regulatory Authority, the New York Stock Exchange and before the National Association of Securities Dealers, Office of Dispute Resolution. Over the last twenty years, he has represented more than a thousand investors from all across the United States and from several foreign countries, in claims against stockbroker and broker-dealers for fraud, breach of fiduciary duty, churning or excessive trading, the sale of unsuitable investments, the sale of defective investments, the sale of unregistered securities, and the failure to supervise. He is frequently quoted in the national media on securities and investment related issues, most recently on National Public Radio. He offers his services on purely a contingent fee basis, and is also a member of Public Investors Arbitration Bar Association.

 

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