FINRA Imposes Arbitration Freeze in Puerto Rico
The Financial Industry Regulatory Authority (FINRA) has declared a temporary freeze on all arbitration proceedings in Puerto Rico due to the unprecedented and increasing volume of claims swamping FINRA’s Dispute Resolution unit. The freeze will remain in place until FINRA can staff up with additional arbitrators to handle the load.
The huge increase in arbitration volume stems from the suffering municipal bond market in Puerto Rico. The territory has about $70 billion in municipal bond debt, and the filing for bankruptcy by Detroit in 2013 sparked a panic by investors worried that Puerto Rico may be next. The Puerto Rico bond market is down an astounding 15.24% in the last year. A huge volume of claims against brokers who sold the bonds to investors has caused FINRA’s normal operations to become bogged down by the sheer number of claims to arbitrate.
FINRA is both recruiting local trained, certified arbitrators from Puerto Rico and transferring arbitrators from local areas such as Florida. FINRA has issued a statement that it is confident it will soon be able to deal with the existing claims, and the freeze is only a temporary measure to secure “breathing room” while it organizes the solution. Meanwhile Puerto Rico was able to raise an additional $3.5 billion in bond sales in early March 2014.