Finra Names Names of Firms, Brokers Who Owe Arbitration Money
Turning up the heat on firms and brokers that fail to pay arbitration awards to customers, the Financial Industry Regulatory Authority on Tuesday published a list of those in arrears.
The web page includes names and registration numbers of 154 brokers Finra has suspended for non-payment of a customer loan as of October 2018, and of 78 inactive firms that were expelled or had their registrations suspended or revoked between 2012 and 2016 with unpaid award balances. It also lists 29 individuals who listed bankruptcy as a non-payment defense over the five-year period.
“It appears as though Finra is trying to publicly expose and shame the deadbeats,” said Andrew Stoltmann, a Chicago plaintiff’s lawyer and former president of the Public Investors Arbitration Bar Association.
Stoltmann in March co-wrote a report suggesting that Finra create a recovery pool for unpaid awards, but said he considered the “shame” list a good first start.
Finra, which in February floated an industry-funded pool as a possible approach to addressing the issue, said it is publicizing the list to create greater transparency for investors. Other approaches raised in Its discussion paper were raising capital requirements for member firms and requiring arbitration-award insurance coverage.
“These firms and individuals are no longer FINRA members or associated with a FINRA member, although they may be operating in another area of the financial services industry where FINRA registration is not required,” the regulator said Tuesday about its creation of the list of award delinquents.
Around 2% of awards made by Finra arbitrators between 2012 and 2016 have gone unpaid, the regulator has said. That translated to about $14 million of $119 million awarded to investors in 2016, it reported.
In May, Senator John Kennedy (R-LA) and Elizabeth Warren (D-MA) co-sponsored a bill to require broker-dealers to fund an unpaid arbitration award pool. The legislation stalled in committee after opposition from the Securities Industry and Financial Markets Association.
Under Finra’s current rules, brokers and firms have 30 days from the date of the award to make payments to customers or face suspension.
Around 635,000 are registered as brokers with Finra.