Welcome to Financial Advisor IQ

Senator Tries to Hold Finra Liable for Unpaid Arb Awards

March 8, 2018

Sen. Elizabeth Warren, D-Mass., wants to make Finra liable for unpaid arbitration awards, ThinkAdvisor writes.

The senator’s Compensation for Cheated Investors Act would require the industry’s self-regulator to create a pool to cover unpaid awards using money collected from penalties Finra collects from its member firms, according to the publication. The legislation also proposes requiring Finra to track whether the awards are paid out, ThinkAdvisor writes. Warren suggests Finra use its existing authority to ensure the unpaid arbitration awards reach their intended recipients, according to ThinkAdvisor.

“Finra has the authority to make sure defrauded investors don’t get stiffed — and this bill will make sure it uses it,” she says, according to the publication.

Over the years, unpaid awards have amounted to hundreds of millions of dollars, Warren claims, according to ThinkAdvisor. In 2013 alone the regulator had more than $62 million in unpaid awards, according to a December 2015 report from the regulator’s own Dispute Resolution Task Force, Warren says, according to ThinkAdvisor.

The Public Investors Arbitration Bar Association says almost a third of all awards weren’t paid that year, making up almost a quarter of the total arbitration amount awarded in 2013, according to the publication. PIABA also says unpaid awards amounted to $200 million in the period from 2012 through 2016, according to ThinkAdvisor.

Senator Elizabeth Warren

A Finra spokesperson tells the publication the regulator has taken measures to help ensure awards are paid out. The spokesperson also points to a discussion paper Finra released in February that offers “perspectives on customer recovery of judgments and awards in the financial services industry, with a particular focus on the arbitration forum operated by Finra.“

By Alex Padalka
  • To read the ThinkAdvisor article cited in this story, click here.