Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

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Tuesday, November 6, 2012

FINRA Issues Guidance on Disputes Between Investors and Non-Member IAs

FINRA Dispute Resolution recently announced that it would make its arbitration forum available to non-member investment advisers and has posted on its website Guidance on Disputes between Investors and Investment Advisers who are not FINRA-regulated firms.  FINRA will accept disputes between investors and non-member IAs on a "voluntary, case-by-case basis" if the parties meet the following conditions:

  • The IA and investor submit a post-dispute agreement to arbitrate.
  • The IA or other parties agree to pay all arbitration surcharge fees.
  • The investor files a special written submission agreement to submit the dispute to FINRA Dispute Resolution that is:
    Signed by all parties to the arbitration (including all investor parties and all IA parties).
    Signed after the events occurred that gave rise to the underlying dispute.

The special submission agreement requires the parties to acknowledge that:

  • FINRA cannot enforce awards entered against non-member IAs and/or their employees (because FINRA is not a Self-Regulatory Organization for IAs).
  • Prevailing parties may enforce awards entered against non-member IAs and/or their employees in a court of competent jurisdiction pursuant to applicable state or federal law.
  • FINRA may bar the IA from the forum in future cases if an IA fails to pay any award, settlement agreement, or FINRA fees.
  • FINRA and its arbitrators and mediators will be held harmless from liability arising in connection with the resolution of the parties’ dispute.
  • Disputes involving IAs will be administered in accordance with the SEC approved FINRA Codes of Arbitration Procedure.
  • The final award will be made publicly available.

FINRA will also accept industry disputes between non-member IAs and their employees on a voluntary, case-by-case basis if the parties meet the above conditions.  FINRA will offer mediation services for any IA disputes on a voluntary basis.

 


 

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