Thursday, July 28, 2022
A vanishingly small cadre of investor protection clinics now exist at law schools across the United States. Most are on the east coast with the greatest concentration of clinics in and around New York City. Pace’s Jill Gross wrote the leading history of the rise and possible extinction of these clinics. The major problem has always been funding. I ran one at Michigan State before taking my first tenure-track teaching post. We recovered hundreds of thousands for ordinary people. It closed after I left for lack of funding.
In 2018, the SEC's Investor Advisory Committee formally recommended financial support for investor clinics. Four years later, help sits just over the horizon. Earlier today, Nevada's Senator Cortez Masto introduced legislation to create a sustainable funding mechanism for investor protection clinics. Similar legislation has also been introduced in the House by Illinois Congressman Mike Quigley.
The proposed legislation would allow the SEC to administer grants roughly similar to what the IRS already does for tax clinics. This would create sustainable support for these clinics and ensure that services remain available.
A few years back, I ran an investor clinic at UNLV. We had some notable successes, including this $40,000 win over Wells Fargo. But we were not able to keep the clinic open at UNLV because we lacked the resources to run it on a year round basis. The law school has embraced a hybrid model. Many semesters, I'll teach securities regulation, business organizations, or professional responsibility. Other semesters the law school needs me to provide some kind of clinical course for our students. As securities arbitration cases generally take about eighteen months to resolve, they don't fit neatly into a program that starts and stops with semesters. Doing this work requires the ability to carry cases on an ongoing basis.
If the legislation passes, we'd be able to staff up and help so many more people. Some of the work involves bringing claims through FINRA arbitration. But that isn't all that these clinics do. Often, investors have losses and want help understanding what happened. These clinics provide a valuable resource for people to figure out whether they have a claim.