FINRA Takes Steps to Restrict Non-Lawyer Representation in Investor Arbitrations

Posted on October 20th, 2023 at 1:22 PM
FINRA Takes Steps to Restrict Non-Lawyer Representation in Investor Arbitrations

From the desk of Jim Eccleston at Eccleston Law 

The Financial Industry Regulatory Authority (FINRA) has proposed a new rule prohibiting individuals who are not lawyers from receiving compensation from representing parties in its arbitration forum.

FINRA distinguished between compensated and uncompensated non-lawyers representing investors. Under the proposed rule, FINRA would permit individuals who are in the process of becoming lawyers, such as law school students participating in a clinical program under attorney supervision, to represent investors in the forum. Additionally, it would allow non-compensated representatives like friends and family members to continue representing investors. According to AdvisorHub, FINRA conducted a review in response to concerns from users of the arbitration and mediation forum before making this proposal.

FINRA reported that only 1 percent of investors using the forum are represented by paid non-lawyers. Those individuals typically have backgrounds in the securities industry and primarily handle arbitration or mediation claims against broker-dealers and their associated persons, according to FINRA. In rarer cases, they represent associated persons in expungement claims against broker-dealers.

However, FINRA's review uncovered several recent allegations of improper conduct by those non-lawyers. For example, California regulators discovered one instance where a non-lawyer made false promises to assist customers in recovering past failed investments and violated state rules by charging advance fees. Additionally, another compensated non-lawyer representing an investor in FINRA's dispute forum faced criminal sentencing in New York for felony grand larceny after attempting to defraud and falsifying business records related to a matter before an arbitration panel, as reported by FINRA.

 

Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.

Tags: eccleston, eccleston law, finra

Return to Archive

TESTIMONIALS

Previous
Next

Thank you for your professional assistance with this matter. You are very good at what you do.

John T.

LATEST NEWS AND ARTICLES

September 17, 2025
FINRA Suspends Centaurus Dallas Broker Over Excessive Alternative Investment Sales

FINRA has suspended a Centaurus Financial broker, William Burks, for four months after finding he placed as much as 91 percent of a client’s net worth into illiquid alternative investments.

September 16, 2025
Former Morgan Stanley Advisors Win Partial Court Victory in Client Solicitation Dispute

Two former Morgan Stanley advisors in Hackensack, New Jersey have defeated Morgan Stanley’s initial effort to block them from soliciting clients, according to an August 15 order from New Jersey Superior Court.

September 15, 2025
California Young-Gun Investor Charged in Alleged $6 Million Ponzi Scheme

Federal prosecutors have accused Mihir Deepak Sukthankar, a California resident once celebrated as a teenage trading “prodigy,” of orchestrating a multi-million-dollar Ponzi scheme.