PIABA Reports Unpaid FINRA Arbitration Rewards Increased in 2017
In a report released by the Public Investors Arbitration Bar Association (PIABA) the group asserts that the number of unpaid FINRA arbitration awards rose in 2017. The findings show that an estimated 36% of 2017 unpaid FINRA arbitration awards went unpaid last year.
Study Says that $20 Million Involved Unregistered Brokers
The report, which published the findings of a study done by the Association, analyzed $72 million in unpaid FINRA arbitration awards last year. The study found that $20.6 million involved unregistered brokers and that about 28 cents of every dollar won by customers went unpaid and uncollected.
Many Brokerage Firms Are Uninsured
Many investors are surprised to learn that brokerage firms are not required to carry liability insurance. And even for those firms that do carry insurance, the insurance coverage often is insufficient to cover the brokerage firms’ liabilities or various exemptions from the insurance policies result in no insurance coverage for the investors’ losses.
Compensation Fund Proposed
As a result, PIABA has suggested that FINRA establish a fund to compensate investors, many of whom have lost their life savings as a result of stockbroker misconduct. PIABA president Andrew Stoltmann told reporters on a conference call that the problem of unpaid arbitration awards at FINRA has gotten worse and recent steps to address the issue have not yet provided relief to investors.
Throughout 2017, FINRA increased transparency about brokers who fail to to pay arbitration awards while also trying to make the claims process easier for clients. But no steps have been taken yet to establish a fund for investors left with unpaid FINRA arbitration awards. The brokerage industry regulator has said that Congress or the SEC would need to be involved in the decision-making process to create a fund for unpaid arbitration awards.
PIABA suggests that FINRA could create an investor compensation fund using fines that it collects from brokerage firms that violate FINRA rules. The fund could be set up by the regulator through its own rulemaking but so far FINRA has not considered this option.
According to the PIABA report, there was $14 million in unpaid arbitration awards in 2016, while there was $173.8 million collected in fines.
Earlier this year FINRA released statistics about unpaid arbitration that indicated that between 22% and 30% of awards went uncollected each year from 2012 through 16, totaling nearly $200 million in uncollected arbitration awards.
This latest report, combined with the FINRA statistics, released for the first time ever by the regulator, show that the issue of unpaid arbitration fines is only worsening.
To learn more about the PIABA report, click here.
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