FINRA Amends Rules to Incentivize Payment of Arbitration Awards
The Financial Industry Regulatory Authority has amended its Membership Application Program (MAP) rules to incentivize the timely payment of arbitration awards by preventing a broker from switching firms, or a firm from using asset transfers or similar transactions, to avoid payment of arbitration awards.
The Financial Industry Regulatory Authority has amended its Membership Application Program (MAP) rules to incentivize the timely payment of arbitration awards by preventing a broker from switching firms, or a firm from using asset transfers or similar transactions, to avoid payment of arbitration awards.
Under the new rules, FINRA can deny new membership to a broker or firm if the applicant is the subject of a pending arbitration claim.
According to Regulatory Notice 20-15, “the amendments will address situations where (1) a FINRA member firm hires individuals with pending arbitration claims, where there are concerns about the payment of those claims should they go to award or result in a settlement, and the supervision of those individuals; and (2) a member firm with substantial arbitration claims seeks to avoid payment of the claims should they go to award or result in a settlement by shifting its assets, which are typically customer accounts, or its managers and owners, to another firm and closing down.”
The new rules have been approved by the Securities and Exchange Commission and go into effect on September 14, 2020.
