FINRA Contemplates Creation of Fund for Unpaid Arbitration Awards

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 Nasdaq.com, 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.

New Hampshire Adopts Uniform Securities Act - Effective January 1, 2016

On July 27, 2014 New Hampshire’s Governor signed into law a new Uniform Securities Act. The new Act repeals and replaces New Hampshire’s current Uniform Securities Act which is based on the 1956 model securities act. The new Act is based on the Uniform Securities Act of 2002, drafted by the Uniform Law Commission of the American Bar Association, which is a model statute designed to guide each state in drafting its state securities law.

The new Act goes into effect on January 1, 2016 and is intended to simplify and facilitate capital-raising by small-and medium-sized companies, better align securities offering rules with regulatory interests, update and clarify securities compliance requirements, and preserve and enhance investor protections. It is also expected to eliminate any disincentives for companies to operate in New Hampshire and bring consistency between New Hampshire securities law and the securities law of many other states.

A link to the new Securities Act is here.