NASAA Members Approve Model Rule Addressing Unpaid Client Arbitration Awards
From the Desk of Jim Eccleston at Eccleston Law:
The North American Securities Administrators Association (NASAA) and its members have voted to adopt a model rule addressing financial advisory firms that fail to pay customer arbitration awards.
According to NASAA President Melanie Lubin, “Broker-Dealers and investment advisers should promptly pay any arbitration awards or regulator-imposed fines and if they do not, this model rule provides state regulators with another means to take action against them.” Pursuant to the model rule, a failure to pay any investment-related, customer-initiated arbitration award or judgment, fine, civil penalty, order of restitution, or order of disgorgement would constitute a dishonest or unethical practice.
Financial advisory firms may avoid regulatory actions by engaging in alternative payment arrangements pertaining to obligations promulgated by the model rule. In essence, the model rule will serve as an additional basis for enforcement actions related to unpaid arbitration awards and may incentivize financial advisory firms to satisfy their monetary obligations to clients.
Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, regulatory and disciplinary matters.