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Rules & Regulations

Should Congress Pass a Law to Deal with 'Unpaid Arbitration Awards'?

June 28, 2018

by Howard Haykin


The U.S. Senate is considering legislation (S. 2499, sponsored by Elizabeth Warren) that would require FINRA to establish a relief fund in order to provide investors with the full value of unpaid arbitration awards issued against brokerage firms or brokers regulated by FINRA. 


SIFMA has serious concerns with 'Unpaid Arbitration' legislation, which were expressed on Thursday in testimony before the U.S. Senate Committee on Banking, Housing and Urban Affairs.


“We strongly support exploring reforms to reduce the number of unpaid arbitration awards. An industry-financed pool, however, is a poor public policy choice to achieve that end because it is unfair to the broker-dealers who honor their arbitration award obligations, is essentially a tax on investors, and it introduces numerous moral hazards.”


Among SIFMA’s concerns: 

  • Using enforcement penalties to pay unpaid arbitration awards creates inappropriate conflicts of interest.
  • It is fundamentally unfair to require good actors who pay their arbitration awards to pay for bad actors who do not.
  • FINRA has already taken numerous steps to resolve the issue under its existing authority, and those efforts should be given a chance.


For further details on SIFMA's views, click on SIFMA Written Testimony.