“Blatantly Self-Serving”: PIABA Urges FINRA To Reject Industry Trade Group’s Arbitration Reform Recommendations

WASHINGTON, DC – AUGUST 4, 2025 – In a new letter filed with the Financial Industry Regulatory Authority (FINRA), the Public Investors Advocate Bar Association (PIABA) strongly urged against adopting the recent arbitration reform recommendations from the Securities Industry and Financial Markets Association (SIFMA). Warning that the recommendations would betray FINRA’s investor protection mission, PIABA’s letter asks FINRA to “resist pressure from industry groups seeking to dilute hard-won safeguards.”

Adam Gana, President of PIABA and managing partner of Gana Weinstein LLP, said: “SIFMA’s list of arbitration reform recommendations is so blatantly self-serving that it almost reads like a parody. SIFMA’s claim that this will improve FINRA’s ‘fairness and integrity’ is an insult to the intelligence of Main Street investors and folks saving for retirement. These rule changes would make it easier for bad actors to escape responsibility and harder for their victims to seek justice.”

PIABA’s letter outlines the following suggestions for FINRA to stay faithful to its stated investor protection mission:

• FINRA Should Reject Dollar Thresholds Carve-Outs and Preserve Investor Access: This proposal is a transparent attempt to circumvent FINRA’s established procedures – developed over decades with input from all stakeholders – and avoid liability in high stakes cases. Alternative forums often have no enforcement mechanism to force compliance with their rules, are more expensive and less transparent. Worse, FINRA has no process in place to monitor compliance with awards issued by these forums, nor would it retain authority to refer misconduct for enforcement. The result would be fragmentation, inconsistency, and a weakening of FINRA’s oversight capacity.
• FINRA Should Reject Damage Limitations in the Forum: There is no evidence that arbitrators are awarding excessive or inappropriate punitive damages. SIFMA’s letter merely asserts—without citation—that “[r]ecent extreme outlier punitive damages awards” have occurred. It provides no examples, no case analysis, and no basis for concluding that any damages awarded were improper. In fact, punitive damages are awarded in less than 1% of FINRA arbitrations. PIABA believes punitive damages are far too infrequent and often insufficient to accomplish the stated legal bases for punitive damages, including both punishment and deterrence goals.
• FINRA Should Not Create More Burden, Costs, and Inefficiency by Enabling or Expanding Motions to Dismiss: FINRA arbitration is intended to be an equitable forum where investors, who are compelled into arbitration by industry contracts, must have the opportunity to present their claims to a panel. Authorizing additional motion practice would frustrate that purpose, increasing procedural hurdles and depriving investors of their chance to be heard. SIFMA’s proposal appears to seek a motion to dismiss practice that would look more like the process under court codes of civil procedure and would result in significant additional costs and burdens and would result in delays due to disputes regarding pleading requirements and amendments to claims to cure alleged deficiencies or defects in filed claims.
• FINRA Should Not Limit Discovery: Access to discovery is essential for investors seeking to prove their claims. FINRA’s Code of Customer Arbitration already substantially limits some of the traditional discovery tools available in court litigation including depositions, requests for admission, and interrogatories. Industry efforts to shield their internal documents and materials which will reveal their misconduct would unfairly stack the deck against the customers who are often mom and pop retail investors and retirees seeking to recover losses of significant portions of their life savings.
• FINRA Does Not Need to Micromanage Hearings for Arbitrators: SIFMA’s suggestion of creating a “central contact point” to serve as a hidden “master hand” creates a grand canyon of issues and would almost certainly result in greater inefficiency and disorder and would erode the confidence in the FINRA Arbitration system by creating an opaque decision-maker that the parties would not be able to present their case, evidence, or arguments to.
• FINRA Should Reject SIFMA’s Push for Industry-Dominated Arbitration Panels: Investors are entitled to dispute resolution before a neutral and balanced tribunal—not one engineered to protect the industry from accountability. FINRA must reject efforts that would turn its arbitration forum into a venue where the outcome is skewed before the case even begins.
• FINRA Should Continue to Monitor Its Arbitration Forum: Although PIABA opposes SIFMA’s requests to further tilt the playing field in the industry’s favor, PIABA does agree that FINRA should effectively monitor its arbitration forum and address poorly performing arbitrators—either with additional training or removal from the arbitrator pool.

“FINRA appears to be implementing a new deregulatory agenda that sooner or later will hurt investors and markets, and SIFMA is cheering it on,” Gana added. “If FINRA continues on this path, confidence in the arbitration forum – and the industry at large – will only continue to erode.”

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ABOUT PIABA

Public Investors Advocate Bar Association is an international, not-for-profit, voluntary bar association of lawyers who represent claimants in securities and commodities arbitration proceedings and securities litigation. The mission of PIABA is to promote the interests of the public investor in securities and commodities arbitration, by seeking to protect such investors from abuses in the arbitration process, by seeking to make securities arbitration as just and fair as systemically possible and by educating investors concerning their rights. For more information, go to www.piaba.org.

MEDIA CONTACT:  Max Karlin at (703) 276-3255, mkarlin@hastingsgroupmedia.com.