Senate Democrats push Finra to create fund to compensate investors for unpaid arbitration claims

Sen. Elizabeth Warren says investors are being taken advantage of by brokerage firms, citing a study that determined the industry failed to pay $62 million in claims in 2013.
MAR 09, 2017

Senate Democrats want Finra to compensate investors who prevail in arbitration cases but are stiffed by the losing brokerage. In a Senate Banking Committee markup of unrelated bills Thursday, Sen. Elizabeth Warren, D-Mass., offered an amendment that would direct Finra to create a fund that would cover unpaid arbitration awards. She later withdrew the measure, but she and fellow Democrats made clear they want the committee to consider legislation in the future. She cited analyses that show that arbitration victors were unable to collect $62 million in awards in 2013, an amount that represented one quarter of all awards that year. "We're talking about millions of dollars that rightly belong to working families," Ms. Warren said. In a Senate Banking Committee hearing a year ago, Ms. Warren pressed then-Finra chairman and chief executive Rick Ketchum on unfulfilled arbitration awards. "Finra has not taken any action to address this problem," she said. Many brokers are "thinly capitalized," said Sen. Mark Warner, D-Va. "They get into an arbitration, [then] they shut down and move," Mr. Warner said. The most senior Democrat on the committee, Sen. Sherrod Brown, D-Ohio, also voiced support for arbitration legislation and called for a broader congressional review of the Financial Industry Regulatory Authority Inc., the broker-dealer self-regulator. "The committee should consider additional oversight of Finra's work since they have fallen short," Mr. Brown said. "Finra continues to be very concerned about awards to investors that go unpaid," Finra spokeswoman Nancy Condon said in a statement. "We have been taking a careful look at this issue and look forward to working with Congress to try to find a solution." Finra runs the arbitration system that adjudicates disputes between customers and brokers as well as between brokers and financial firms. The new chairman of the committee, Sen. Mike Crapo, R-Idaho, emphasized during Thursday's markup that he wants to work on legislation that draws bipartisan support. He told reporters after the meeting that he's not sure whether Finra reform falls into that category. "I don't know because this is a new issue," Mr. Crapo said. "We will work to see if there can be bipartisan support. But I can't predict right now." Mr. Crapo said that he does want to help investors obtain the money they win in arbitration cases.

Latest News

Treasury hits BofA with $1.2B fine over money laundering violations
Treasury hits BofA with $1.2B fine over money laundering violations

“Today’s actions send a clear message that even the biggest financial institutions are not above the law,” said Treasury Secretary Scott Bessent.

The hidden cost of growing a firm without intention
The hidden cost of growing a firm without intention

To build a truly self-sustaining practice, enterprising advisors have to start with a vision of what they want to be – and accept the realities that come with building toward it.

Waverly, Apella buy $412M in RIA assets across Oregon, Northeast
Waverly, Apella buy $412M in RIA assets across Oregon, Northeast

Serial acquirers add a 35-year-old Oregon wealth manager and a New York practice focused on women navigating life transitions.

&Partners taps two UBS leaders to run its private wealth business
&Partners taps two UBS leaders to run its private wealth business

Mara Glassel and Julie Fox will co-lead the fast-growing hybrid RIA’s ultra-high-net-worth and private wealth businesses.

Citi sees Q3 profit jump as wealth unit books record $38B in net new assets
Citi sees Q3 profit jump as wealth unit books record $38B in net new assets

The banking giant's wealth arm extends its revenue streak as it pushes to exit consent orders weighing on growth since 2020.

SPONSORED Built on insurance experience to deliver on long-term promises

Knighthead Life entered the market with a competitive MYGA. A strong launch earned advisor confidence and paved the way for FIAs.

SPONSORED In the Age of AI, Trust Becomes the Advisor's Greatest Asset

As AI makes financial information more accessible than ever, Lana Hock explains why human judgment, trust, and empathy remain the qualities clients value most in a financial advisor