In October 2012, at the Public Investors Arbitration Bar Association meeting in Austin, Texas, FINRA Dispute Resolution President Linda Fienberg announced that FINRA will now accept disputes between Investors and Investment Advisers. FINRA is the self-regulatory organization that oversees brokers, while Investment Advisers are regulated directly by the Securities Exchange Commission. Before this announcement, FINRA was only open as a dispute resolution forum to investors and their brokers. Although Investment Advisers still will not be subject to the regulatory powers of FINRA, FINRA Dispute Resolution will accept their disputes on a voluntary, case-by-case basis if the parties meet the following requirements:
- The Investment Adviser and investor submit a post-dispute agreement to arbitrate
- The Investment Adviser 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
FINRA explained that it has received inquiries from lawyers who represent investors and those who represent advisers which are not FINRA members about the availablity of FINRA’s arbitration and mediation dispute resolution forums.
This announcement may bring FINRA one step closer to assuming regulatory oversight over Investment Advisers. For now, though, FINRA will not have authority to enforce awards rendered against Investment Advisers who are not registered with the organization. Instead, Investors will have to go to court to enforce an arbitration award.
To read FINRA’s guidance on these disputes, click here.