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- Julie Erhardt is SEC's New Acting Chief Risk Officer
- Chyhe Becker is SEC's New Acting Chief Economist, Acting Director of Economic and Risk Analysis Division
- Getting a Handle on Virtual Currencies - FINRA
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NEWSLETTERS & ALERTS
Unpaid Arbitration Awards: Time for a Wall Street Anti-Fraud Fund
by Howard Haykin
Mr. Singer goes on to say:
Bill does not favor extending such a guaranty into punitive damages or "unreasonable" attorneys' fee and other charges, but he does believe that the securities industry has the wherewithal and the moral/ethical obligation to put its money where its dirty mouth has been. While there may be legitimate debate as to how best to fund the anti-fraud fund, that only goes to the mechanics of doing the right thing. In the case of [FINRA], we have [an SRO] that needs to get behind this pro-consumer effort and with haste. ... FINRA's regulatory mandate is set out in FINRA Rule 2010: Standards of Commercial Honor and Principles of Trade: "A member, in the conduct of its business, shall observe high standards of commercial honor and just and equitable principles of trade." Today's BrokeAndBroker.com Blog asks whether the [SRO] itself will observe high standards of commercial honor and just and equitable principles of trade when it comes to seeing that justice is done for defrauded public investors.
AN OFT-REPEATED DISCUSSION. Mr. Singer’s plea isn’t the first time that the idea of an anti-fraud fund has been raised. Here are 3 postings from BrokeAndBroker and Financialish where both Mr. Singer and I have expressed similar concerns:
- $5 Million Awarded in FINRA Customer Arbitration. Now Let's Beat The Dead Horse (BrokeAndBroker.com, August 17, 2018)
- CEO to FINRA: Go Ahead and Sanction Me for Violating Membership Agreement (Financialish.com, December 31, 2018)
- Should Congress Pass a Law to Deal with 'Unpaid Arbitration Awards'? (Financialish.com, June 28, 2018)
That last referenced posting reported on proposed Senate legislation, sponsored by Senator 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 testified against the proposal, expressing serious concern that such an industry-financed pool “would be unfair to the broker-dealers who honor their arbitration award obligations.”
FINANCIALISH TAKE AWAYS. I believe that it's time for the industry to once again address the problem. There's no justification for inaction because with each passing day more and more public investors are being left out hanging to dry.
And regarding the debate about how best to fund the so-called anti-fraud fund, take Mr. Singer's advice: that only goes to the mechanics of doing the right thing. FINRA needs to get behind this pro-consumer effort and with haste.