FINRA Implements New Rule for Unpaid Arbitration Awards

Posted on June 8th, 2020 at 4:16 PM
FINRA Implements New Rule for Unpaid Arbitration Awards

From the Desk of Jim Eccleston at Eccleston Law LLC:

In a Regulatory Notice, the Financial Industry Regulatory Authority (“FINRA”) detailed amendments to its Membership Application Program (“MAP”) rules. The MAP rule amendments are designed to further encourage the timely payment of FINRA arbitration awards. 

The rule amendments, which are set to take effect September 14, 2020, will address situations where (1) FINRA member firms hire an individual with a pending arbitration claim against them and there are concerns about payment of claims, and where (2) a FINRA member firm with substantial claims against it seeks to avoid payment of the claims by shifting assets. 

Among the rule amendments, there will now be a rebuttable presumption to deny an application for new FINRA membership when the applicant is subject of a pending arbitration claim.  To overcome this presumption, the applicant must show that they have the ability to satisfy any awards stemming from the pending arbitration. For further information on the MAP rule amendments, consult FINRA regulatory notice 20-15.

Unpaid arbitration awards have been a problem for FINRA.  According to FINRA, as of December 2019, there was still $31 million in unpaid arbitration awards entered in 2018.  At the end of 2019, 30% of the FINRA arbitration awards entered in 2018 were still unpaid.

The attorneys of Eccleston Law LLC represent investors and advisors nationwide in securities and employment matters. The securities lawyers at Eccleston Law also practice a variety of other areas of practice for financial investors and advisors including Securities FraudCompliance ProtectionBreach of Fiduciary DutyFINRA Matters, and much more. Our attorneys draw on a combined experience of nearly 65 years in delivering the highest quality legal services. If you are in need of legal services, contact us to schedule a one-on-one consultation today.

Related Attorneys: James J. Eccleston

Tags: eccleston, eccleston law, james eccleston, finra, arbitration awards

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