A quarter of all Financial Industry Regulatory Authority customer arbitration cases that awarded damages went unpaid in 2016, according to a just released discussion paper by FINRA.
Andrew Stoltmann, president of the Public Investors Arbitration Bar Association, called the percentage “massive,” but applauded FINRA for “attempting to get on top” of the issue by releasing the discussion paper.
The paper — “FINRA Perspectives on Customer Recovery” — released Wednesday, details perspectives on customer recovery of judgments and awards in the financial services industry, with a particular focus on the arbitration forum operated by FINRA.
By releasing the paper, the broker-dealer self-regulator said it “hopes to encourage a continued dialogue about addressing the challenges of customer recovery across the industry.”
According to FINRA’s paper, in 2016, of the total 2,457 arbitration cases, 1,747 settled, 389 closed by award, 212 were withdrawn and 109 closed “by other means.”
FINRA also released Wednesday a Regulatory Notice seeking comment on proposed amendments to its rules designed to create further incentives for the timely payment of awards by preventing an individual from switching firms, or a firm from using asset transfers or similar transactions, to avoid payment of arbitration awards.