Mandatory Arbitration Fairness – Registered Investment Advisers (RIAs)

Issue: Investors are forced into costly arbitration forums that price them out of justice. The Registered Investment Advisers (RIAs) require them to sign contracts that require them to arbitrate in costly forums, travel extreme distances for the arbitration, or contain clauses stating RIA is not liable.

Desired Resolution: Have all RIAs participate in a forum that is at least equivalent to the FINRA arbitration forum.

Materials

• Issue Summary

• Arbitration of Investment Adviser Disputes is Unfair, Adam Gana, James Fallows Tierney, and Zahra Hodjat

• Fiscal Year 2025 SEC Examination Priorities – Division of Examinations

• November 2, 2023 Coalition Letter to Gensler 

• July 29, 2024, PIABA Memo to the SEC Office of Investment Management

• June 27, 2023, SEC Response to Congress: Mandatory Arbitration Among SEC Registered Investment Advisers

• SEC Office of Investor Advocate Fiscal Year 2023 Report on Activities

• February 1, 2024, Investor-Advocacy Coalition to Push SEC for RIA Rule Reform in Wake of Scathing Report – Press Event

• Forced Investment Advisory Arbitration and the Effect on the Investing Public and on the Industry, Adam J. Gana, PIABA President, prepared for SEC Investor Advisory Committee

Issue: Americans lose over $10 Billion annually to scams and fraud. Often, these fraudsters target retirement savings accounts of elderly Americans.

Desired Resolution: Have congress ask both the SEC and FINRA to clarify their rules, issue guidance and mandate training to stop facilitation of fraud.

Materials

• Issue Summary

• Elder Fraud, In Focus – fbi.gov

• Federal Bureau of Investigation Elder Fraud Report 2023

• Interagency Statement on Elder Financial Exploitation

Issue: Investors who have been harmed by their financial professionals and received a judgement after going the required arbitration process remain unpaid. FINRA reports on unpaid awards for investors who have been harmed by their Broker-Dealers. The reports show that nearly 24% of all award funds to investors go unpaid. The SEC does not maintain any data for investors that go through mandatory arbitration in the Registered Investment Adviser (RIA) arbitration.

Desired Result: Require all financial professionals to have insurance coverage.

Materials

• Issue Summary

• October 25 2024, The Insurance Solution for Financial Advice Failures, Authors, Benjamin Edwards and Adam Gana

• September 29, 2021, PIABA Report: FINRA Arbitration’s Persistent Unpaid Award Problem, Authors Hugh D. Berkson and David P. Meyer

• March 7, 2018, PIABA Report: Unpaid Arbitration Awards – The Case for an Investor Recovery Pool, Authors Andrew Stoltmann and Hugh D. Berkson 

• February 25, 2016,  PIABA Report: Unpaid Arbitration Awards: A Problem the Industry  Created – A Problem the Industry Must Fix, Author Hugh D. Berkson