Financial professionals and firms who do not pay arbitration awards or fines would be subject to tougher penalties under a new rule proposed by the North American Securities Administrators Association, Financial Advisor magazine reports.
The rule, released for public comment this week, would give NASAA members the authority to bring enforcement action against licensed entities who fail to meet their regulatory obligations, including broker-dealers, agents, and investment advisors.
The proposal came on the heels of a recent study by the Public Investors Advocate Bar Association which found that $5 million in arbitration awards to investors went unpaid in 2020 and $19 million in 2019. The report said nearly one of every four dollars awarded to investors were not paid last year.
Under the proposed rule, any state-licensed entity that does not pay an arbitration award would be found to have committed an unethical business practice. State regulators would then be able to impose punishment that could include revoking their license.
Once the public comment period is concluded, the model rule can be presented for approval to the membership of NASAA, which represents state securities regulators. It is being proposed under the Uniform Securities Acts of 1956 and 2002.
NASAA’s full report on the proposal can be found here.
Handling financial services disputes requires counsel with a significant understanding of the industry, the laws, rules and regulations that impact our clients and the forums in which disputes are adjudicated. At Lewitas and Hyman, we have handled hundreds of arbitrations before self-regulatory organizations nationwide. For more information about our Chicago-based arbitration and litigation services, please contact Hyman Cotter PC at 312-291-4600 or through our online contact form.
