A new bill called the Compensation for Cheated Investors Act would require
FINRA to pay investment losses back to investors from a pool of funds.
Unpaid arbitration awards would be funded by penalties charged to FINRA
The Compensation for Cheated Investors Act
Massachusetts Senator Elizabeth Warren recently introduced a bill that
would require FINRA, the Financial Industry Regulatory Authority, to create
a pool to pay arbitration judgments against its member brokerage firms.
Unpaid arbitration awards would be paid from a pool of funds established
by penalties charged to FINRA broker-dealers. FINRA would be required
to track payments and make sure that future arbitration awards are paid
to investors. Senator Warren declared that investors have lost millions
of dollars to unpaid arbitration awards. The Compensation for Cheated
Investors Act would ensure that FINRA was protecting investors from investment fraud.
Attorney David Meyer is an officer and director of the Public Investors
Arbitration Bar Association (PIABA). According to PIABA, there were unpaid
arbitration awards that totaled $62 million in 2013, and that figure represents
only 25 percent of total arbitration awards for that year. In 2015, The
United States General Accounting Office recommended that FINRA's Dispute
Resolution Task Force take a closer look at the significant number of
unpaid awards and address procedures to pay back losses caused by failed
In a recent paper published by FINRA, regulators announced a plan to hold
discussions that address the issue of unpaid arbitration awards to investors.
FINRA indicated that they wanted to identify information that will improve
protection for investors against investment fraud from broker-dealers.
FINRA is also seeking rule amendments that will prevent broker-dealers
charged with investment fraud from switching brokerage firms and using
asset transfers to avoid paying arbitration awards.
Under the Compensation for Cheated Investors Act, FINRA would be required
to do the following:
- Ensure there is sufficient money in the relief fund pool at all times to
pay each investor who submits a claim the full amount owed.
- May not prohibit any investor from filing a claim.
- May not limit the award amount than an investor may receive from the relief fund.
- Must ensure that the relief fund is funded first by penalties paid by broker-dealer
members, then from other FINRA sources.
- Must issue annual disclosures on a public website.
If you have been a victim of investment fraud, contact the attorneys at
Meyer Wilson for claims assistance and a free consultation at 888-390-6491 today.