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Millions of Dollars Owed to Investors in FINRA Settlements Going Unpaid

Thursday, March, 10, 2016


According to attorneys from the Public Investors Arbitration Bar Association, FINRA is doing a terrible job helping investors collect their arbitration awards owed to them by their brokers. Information from a recent PIABA report shows there are at least 75 FINRA arbitration awards unpaid. This amounts to approximately 33% of awards, which amounts to approximately $62 million in award money. PIABA is a non-profit bar association made up of attorneys representing investors in securities and arbitration and litigation.

 

In the past, FINRA has not made public the awards that go unpaid each year. Attorneys from PIABA say this is a problem and also point out the organization is not doing enough to ensure unpaid awards get fixed. According to the report, most brokerage firms are underfunded and only a small amount of net capital is set aside to meet the award obligations. As of 2012, more than half of the brokerage firms maintained less than $500,000 in net capital.

 

They called the awards meaningless if the broker or brokerage firm is unable to pay, and unfortunately, this is all too common. They also point out the irony in brokerage firms encouraging investors to be responsible and maintain financial health, when the firm itself is not following and doing its own advice. FINRA has considered establishing a broker requirement to have insurance coverage to handle arbitration awards, but eventually decided against it. PIABA is calling for a national recovery pool, funded by contributions from FINRA members that would help investors collect awards.