Bipartisan backing for legislation targeting unpaid Finra arbitration awards has supporters hoping the measure will advance this year.
Under the bill, written by Sen. Elizabeth Warren, D-Mass., the Financial Industry Regulatory Authority Inc. would have to establish a fund financed by Finra fine money to cover awards that firms and brokers fail to pay to customers who win arbitration claims.
Ms. Warren has been critical of the ongoing problem of unpaid Finra arbitration awards. Now a Republican, Sen. John Kennedy of Louisiana, has cosponsored her legislation.
"This bill aims to compensate Americans who have been cheated out of hundreds of millions of dollars," Mr. Kennedy said in a May 15 statement. "These investors have already been swindled out of their money once, and thousands of them still haven't been given their unpaid arbitration. Our bill aims to fix that."
The Republican support elevates the topic of unpaid arbitration, according to Andrew Stoltmann, a Chicago securities attorney and president of the Public Investors Arbitration Bar Association.
"It's now become a bipartisan issue," Mr. Stoltmann said.
Although getting any legislation through Congress is a heavy lift — especially during an election year — Republican support for Ms. Warren's measure gives it momentum.
"It increases the likelihood of the bill being enacted, considerably," said David Burton, senior fellow in economic policy at the conservative Heritage Foundation.
A spokeswoman for Senate Banking Committee chairman Mike Crapo, R-Idaho, did not respond to a request for comment. A companion House bill has not been introduced.
In a report released earlier this year, Finra revealed that unpaid arbitration awards from 2012 to 2016 ranged from $14 million in 2016 to $75 million in 2013. That report outlined several options to address this, including establishing a pool of money to fund unpaid arbitration. But Finra did not endorse any of the options and said it wanted to collaborate with other financial regulators on the problem.
Finra is not taking a position on Ms. Warren's bill.
"We appreciate the interest in how to best address this issue, and we're happy to engage in dialogue with anyone who has ideas about how to address it," Finra chief executive Robert Cook said on the sidelines of the Finra annual conference in Washington on May 21.
Over the last several years, the amount of fines Finra assessed would easily cover the amount of unpaid arbitration, according to one of Mr. Burton's recent blog posts.
The fact that the bill would not tap taxpayer funds but rather would be funded by "the bad guys" who violate Finra rules should make it a popular approach on Capitol Hill, according to Mr. Stoltmann.
"It's really appealing now to Democrats and Republicans," he said.