Investor Advocates Push SEC to Investigate Mandatory Arbitration Requirements by RIAs
From the Desk of Jim Eccleston at Eccleston Law:
A coalition of investor advocates has asked the Securities and Exchange Commission (SEC) to investigate the use of mandatory arbitration clauses that RIAs typically include in their customer agreements.
RIAs often require clients to agree to costly arbitration forums, and that tends to dissuade investors from pursing their claims, according to consumer advocacy groups. The investor advocates “are concerned that RIAs are not adequately disclosing their use of pre-dispute arbitration clauses, and may be disadvantaging investors by designating expensive forums, and otherwise limiting investors’ rights to pursue their claims”, according a letter sent by the coalition to SEC Chairman Gary Gensler. The Public Investors Advocate Bar Association, the Consumer Federation of America, and the Center for American Progress each signed the letter and serve as frequent critics of FINRA’s dispute resolution services.
RIAs typically use private arbitration services such as the American Arbitration Association (AAA) and JAMS, which often charges clients thousands of dollars more than the FINRA system. The coalition additionally requested that the SEC gather arbitration information during RIA sweeps including the arbitration venues that are used, and whether the client agreements prohibit class actions or limit the types of claims that may be filed.
Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, regulatory and disciplinary matters.
Tags: eccleston law, sec, rias
