Statement of the Incoming President,

Hugh D. Berkson

PIABA’s thirty-first anniversary is bringing one momentous change for the organization, along with a renewed and reinvigorated commitment to its long-term projects and priorities.  

Starting with PIABA’s evolution, PIABA’s first and only Executive Director, Robin Ringo, is retiring on March 31, 2023, following almost 26 years of dedicated and loyal service.  PIABA’s new Executive Director is Jennifer Shaw, an attorney and former regulator, most recently of the Oklahoma State Securities Regulator’s office.  PIABA looks forward to its next chapter with our new Executive Director.   

Turning to PIABA’s long-term policy goals, I look forward to leading PIABA’s efforts in three critical areas. While these initiatives are distinct, all are firmly rooted in PIABA’s commitment to the fundamental principle that investors who have been victimized by financial service professionals’ wrongful conduct should have an opportunity to be heard in a fair forum and collect awards or judgments when their claims are successful.

First, PIABA will continue to push to remedy the longstanding problem of unpaid arbitration awards.  The most recent FINRA statistics find that 37% of all awards it oversees go unpaid, with nearly $1 out of every $4 awarded to investors going unpaid.  That problem has not improved since PIABA published its first white paper on the subject in 2016.  Further, because anecdotal evidence suggests that Registered Investment Adviser (RIA) awards go unpaid at similar rates, PIABA will continue its efforts to work with the SEC and the state securities regulators to gather detailed and objective data to serve as a foundation for fashioning a remedy in the investment advisor space.  In both instances, while PIABA will continue to highlight the issue and to raise public awareness of the problem, it will also pursue meaningful and substantive dialogue with key regulators and policymakers, including at FINRA, SEC, NASAA,  and legislators to explore specific and actionable solutions to the perennial problem.

Second, PIABA will seek to build upon the unprecedented success it has achieved over past last year in exposing the injustices wrought by the use – and in some cases, the flagrant abuse - of forced arbitration clauses by RIAs.  Specifically, PIABA will work to expose, document, and ultimately eliminate, the inclusion of provisions RIA client agreements whose actual purpose is to deprive investors of access to justice in any dispute resolution forum.  This means taking aim at RIAs that use outrageously expensive fora so the arbitrator fees and administrative costs far exceed the investment losses at issue; inconvenient venues so the travel headaches discourage smaller claims from being pursued; choice of law provisions meant to strip investors’ protection available under local law; and illegal hedge clauses limiting liability and remedies meant to outright scare clients from bringing claims.  Because regulators and policymakers cannot effectively address a problem without an understanding of its nature and scope, PIABA will continue to work with the SEC, NASAA, and RIAs themselves, to gather such data, analyze it, and promote reforms to ensure that mandatory arbitration clauses in the investment advisor space do not deprive investors of the opportunity to seek justice.

Third, PIABA will continue to promote passage of the Investor Justice Act.  The IJA, which was introduced for the first time in both the House and the Senate this Summer, would require the SEC to create a grant program that could award up to $5 million annually in grants to support new and existing law school investor advocacy clinics’ efforts representing “small dollar” investors.  These clinics provide invaluable support and assistance to “mom and pop” investors who would otherwise be unlikely to find legal counsel to help recover their life savings lost to unscrupulous financial advisors.

The recent market volatility indicates that claims will likely increase, which will, in turn, highlight the problems brought about by problematic investment advisor mandatory arbitration clauses and awards that go unpaid by financial services professionals.  Thus, the coming year is poised to be a crucial one for investor protection.