Tr?id=566623520170033&ev=PageView&noscript=1

SEC Report Highlights Concerns Over Mandatory Arbitration Clauses In RIA Practices

Posted on June 30th, 2023 at 1:05 PM
SEC Report Highlights Concerns Over Mandatory Arbitration Clauses In RIA Practices

From the desk of Jim Eccleston at Eccleston Law 

A recent report from the Securities and Exchange Commission (SEC) to Congress has expressed concerns regarding using mandatory arbitration clauses in retail customer agreements by registered investment advisory (RIA) firms. The report questions the adequacy of current disclosure requirements and raises considerations about the potential impact on investors.

According to the staff report, approximately 61 percent of RIA firms that cater to retail investors include mandatory arbitration clauses in their investment advisory agreements. However, determining the exact prevalence of these clauses is challenging due to limited publicly available information.

The report also highlights a stark contrast in disclosure requirements between investment advisor representatives and brokers registered with the Financial Industry Regulatory Authority (FINRA). Investment advisor representatives' disclosures regarding arbitrations were found to be significantly less comprehensive compared to the obligations placed on FINRA-registered brokers, who must disclose pending complaints, hearing outcomes, and settlement details. According to AdvisorHub, the report's findings indicate a need for closer examination and potential revisions to the disclosure requirements surrounding mandatory arbitration clauses in RIA agreements.

 

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

 

Tags: eccleston, eccleston law

Return to Archive

TESTIMONIALS

Previous
Next
Quotes Bigger

You are the best attorneys in the country.

CC

LATEST NEWS AND ARTICLES

1783615970 Law
July 9, 2026
FINRA Suspends Former Branch Manager for Supervisory Failures Linked to Excessive Trading and Churning

A former regional branch manager at a broker-dealer has agreed to Financial Industry Regulatory Authority (FINRA) sanctions after the regulator found that he failed to supervise registered representatives who engaged in excessive trading and churning of customer accounts.

1783525964 Law
July 8, 2026
SEC Sanctions David Lerner Associates for Regulation Best Interest Violations

David Lerner Associates has agreed to settle Securities and Exchange (SEC) charges alleging violations of Regulation Best Interest (Reg BI) that resulted in unnecessary costs to retail investors, according to InvestmentNews.

1783434190 Law
July 7, 2026
Private Credit Funds Face Mounting Redemption Pressure as Investor Sentiment Shifts

A surge in investor redemption requests has intensified pressure on private credit funds, raising concerns about liquidity and long-term stability across the asset class, as reported by The Wall Street Journal.