ThinkAdvisor (March 6, 2018) -- Sen. Elizabeth Warren, D-Mass., introduced legislation Tuesday to require the Financial Industry Regulatory Authority to use its existing authority to compensate investors for unpaid arbitration awards.

The Compensation for Cheated Investors Act directs FINRA to establish a pool funded by penalties from broker-dealer members that will “pay unpaid final arbitration awards and require it to track whether future arbitration awards are paid.”

Said Warren: “FINRA has the authority to make sure defrauded investors don’t get stiffed — and this bill will make sure it uses it.”

Unpaid arbitration awards “have cost ordinary investors hundreds of millions of dollars over the years,” Warren continued. “FINRA is supposed to be looking out for them, not the brokers and dealers who cheat them.”

FINRA and its predecessor self-regulatory organizations, Warren argued, “have let this problem continue for too long.”

A FINRA spokesperson said Tuesday that the self-regulator “has taken many steps in recent years to use the tools within its power to help customers recover the awards they are owed.  Through the discussion paper that we released last month, we have outlined many options and issues that should inform the development of further measures to enhance customer recovery. This issue is unfortunately not unique to FINRA’s forum or the broker-dealer industry.”

Warren cited a December 2015 report by FINRA’s Dispute Resolution Task Force finding that investors were unable to collect more than $62 million in unpaid arbitration awards in 2013 alone.

A study by the Public Investors Arbitration Bar Association determined that one-third of all arbitration awards in 2013 went unpaid and that the $62 million in unpaid awards represented nearly a quarter of the total amount of arbitration awards that year.

A PIABA report, to be released Wednesday, argues unpaid arbitration “is spiraling out of control,” growing to $200 million in 2012-2016. The report will also show the percentage of cases with unpaid awards has grown by 3%.