FINRA Contemplates Creation of Fund for Unpaid Arbitration Awards

Wednesday, September 14, 2016

The Financial Industry Regulatory Authority (FINRA) is considering creating a fund to be used for unpaid arbitration awards. As it stands, some investors do not recover arbitration awards.

According to FINRA News, a study done by the Public Investors Arbitration Bar Association revealed that in 2013 alone a total of $62 million in awards went unpaid—about one in three awards. The Wall Street Journal found that more than $34 million of arbitration awards made to investors in 2014 remain unpaid, or 15% of the total awards granted that year. Of the awards granted to investors in the five years through 2014, almost $213 million, or 13% of overall awards, remain unpaid. A proposal aimed at solving this problem would require FINRA members to pay annual dues into a pool, amounting to about $100 per broker, to help compensate the award winners.

The fund may encourage additional arbitration claims, according to, since investors have little incentive to pursue claims that are uncollectable and securities lawyers may refuse to represent fraud victims when there is no chance of collecting from bankrupt firms or brokers.

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