FinancialAdvisorIQ (March 7, 2016) — Finra’s chief Richard Ketchum says the agency is analyzing the legal environment that lets advisor practices avoid paying arbitration awards and is ready to start barring advisors who don’t comply, ThinkAdvisor writes.

Sen. Elizabeth Warren, D-Mass., in the meantime, has confronted the Senate Banking Subcommittee on Insurance, Securities and Investment divisions about the roughly $62.1 million in arbitration awards still on the table from 2013 judgments, the publication writes.

Meanwhile, a study of 2013 trends in the financial sector by the Public Investors Arbitration Bar Association found that almost $1 out of every $4 awarded goes unpaid, the publication writes.

One of the authors of the PIABA report, Hugh Berkson, said that the General Accounting Office had revealed the problem and unveiled a number of possible solutions, but the advice industry has not followed suit, ThinkAdvisor writes.

Ketchum also says that Finra faces a big challenge when firms become insolvent, WealthManagement.com writes.

But he also told Warren that firms which don’t pay up can’t stay as Finra members, according to the web publication. On the other hand, out of the 75 unpaid awards from 2013, 51 were supposed to come from an individual or a company that’s no longer in the industry, WealthManagement.com writes.

The main problem, however, according to Warren and Berkson, is that most firms simply don’t have the money to meet their obligations, according to ThinkAdvisor.

Sen. Mark Warner, D-Va., suggested Finra could establish a reserve fund for such occasions, the publication writes.
Berkson also supported such a pool, suggesting that assessing a $100 fee per advisor would immediately create a $60 million rainy-day fund, WealthManagement.com writes.

Ketchum, meanwhile, said that the agency could consider “jumps” in capital requirements that would have to be met before a firm could leave Finra, according to the publication.