Investment News (February 27, 2016) – According to a report released this week by the Public Investor Arbitration Bar Association (PIABA), of the 225 FINRA arbitration awards that were handed down in 2013, a whopping 1/3rd of them went unpaid. This resulted in about $62M of arbitration award money that was never paid to damaged consumers (nearly 25% of the total owed that year). PIABA suggests the problem is driven in part by the fact that brokerage firms have such small net capital requirements – more than half of the 4,400 broker-dealers out there maintained less than $500,000 in net capital at the end of 2012 – that often the brokerage firms can’t make good on the arbitration awards even if they wanted to. Accordingly, PIABA suggests that FINRA needs to consider increasing the capital requirements for broker-dealers, and given that FINRA does not require broker-dealers to carry insurance to cover arbitration awards, also advocates that FINRA member firms should be required to pay into a collective “national recovery pool” that would be used to help back arbitration damages against them. Notably, while PIABA’s advocacy is targeted primarily at FINRA-regulated broker-dealers, there are arguably similar concerns about whether the typical RIA has sufficient capital (or insurance coverage) to pay a significant arbitration or other damages award in the case of malfeasance as well.