FINRA Establishes New Rules for Unpaid Arbitration Awards

Posted on May 27th, 2020 at 3:59 PM
FINRA Establishes New Rules for Unpaid Arbitration Awards

From the Desk of Jim Eccleston at Eccleston Law LLC:

The Financial Industry Regulatory Authority (“FINRA”) announced new rules aimed at member firms and registered representatives who have unpaid FINRA arbitration awards.  Pursuant to the new rules, FINRA may deny new membership to a firm or registered representative if that rep or firm has pending arbitration claims against them in which there is a concern about payment of a potential award.  Additionally, the new rule will require firms with substantial unpaid arbitration awards to submit an application for continued FINRA membership and also subject these firms to heightened scrutiny by FINRA if those firms try to shift assets, management or owners to another firm. 

FINRA’s new rule has already been approved by the U.S. Securities and Exchange Commission (“SEC”) and will take effect on September 14, 2020. This new rule is one of a couple steps FINRA is taking to try to combat unpaid arbitration awards.  FINRA has proposed new rules for investors who file an arbitration claim against a broker or firm who becomes inactive during the arbitration as well as a rule that would increase capital requirements for firms who hire brokers with a history of disciplinary problems. This action from FINRA comes after a 2018 study which found that between 2012 and 2016, more than a quarter of all FINRA arbitration awards went unpaid. 

The attorneys of Eccleston Law LLC represent investors and advisors nationwide in securities and employment matters. The securities lawyers at Eccleston Law also practice a variety of other areas of practice for financial investors and advisors including Securities FraudCompliance ProtectionBreach of Fiduciary DutyFINRA Matters, and much more. Our attorneys draw on a combined experience of nearly 65 years in delivering the highest quality legal services. If you are in need of legal services, contact us to schedule a one-on-one consultation today.

Related Attorneys: James J. Eccleston

Tags: eccleston law, james eccleston, finra, arbitration awards, unpaid arbitration

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