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Concerns Arise about FINRA’s Arbitrators

Monday, May, 26, 2014


When recent news broke about a Kansas couple involved in a Ponzi scheme run by a Morgan Stanley broker, FINRA stepped in to provide a list of potential arbitrators.  Shockingly, the list was far from helpful – two of the names listed were of deceased arbitrators.  FINRA’s inadequate attempt to help the situation was seen as a sign of a system many believe is no longer working. 


The Kansas couple claimed Morgan Stanley and various other firms had failed to supervise the broker working on their behalf and that the firm did not alert them to potential losses.  They accused the broker of receiving checks for fraudulent investments.  Morgan Stanley claims the events that affected the Kansas couple did not happen while the broker was managing Morgan Stanley accounts.


FINRA was created to help consumers taken advantage of by unscrupulous financial investors.  Unfortunately, many believe it has accomplished nothing.  Consumers are required to take their disputes to arbitration instead of directly to court.  FINRA was put into place in an attempt to reform a system that permitted Wall Street to protect its own interests out of court.


Whistleblowers, at least one of whom is a former employee of FINRA, stated she was asked to remove arbitrators who would rule against the brokerage firm Merrill Lynch when providing a list of potential arbitrators.  There was also an arbitrator dismissed for dishonestly reporting his legal credentials. 


FINRA claims the oversight concerning the dead arbitrators was a mistake and stated they make efforts to keep their records current by conducting Internet searches and background checks.  They also claim to reach out personally to arbitrators they recommend.