Testimony Jennifer L Shaw

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United States House of Representatives
House Financial Services Committee
Subcommittee on Capital Markets

Hearing entitled:

The Role of Self-Regulatory Organization in U.S. Markets: Examining FINRA and the MSRB

March 5, 2026

Jennifer L. Shaw

Executive Director

Public Investors Advocate Bar Association

March 5, 2026
2:00 PM ET

I.     Professional Background

I am here today on behalf of the Public Investors Advocate Bar Association (“PIABA”) where I have served as Executive Director since 2022. PIABA’s mission is to advocate for the interests of investors in matters of securities fraud and other issues related to securities laws and regulations. PIABA is an active participant in the development of new legislation, rules, and/or regulations to advocate for and protect the rights and interests of public investors across all investor platforms.

 

In my role as Executive Director, I work closely with the Board of PIABA, and its current President Michael Bixby, to advocate for these principles through the development of position papers, press releases, and legislative and regulatory comments, as well as planning and moderating conferences, seminars, and CLE sessions on matters of securities regulation and securities fraud. Prior to working with PIABA, I served as an enforcement attorney for the Oklahoma Department of Securities for over fifteen years. While at the Department I was primarily responsible for overseeing investor education outreach for the state of Oklahoma as well as investigating and prosecuting individual cases of securities fraud.  I have participated as a member of the North American Securities Administrators Association (“NASAA”) Senior Outreach Project Group (where I was awarded the Outstanding Team Service Award).  I am pleased and honored to have the opportunity to speak here today on behalf of PIABA and appreciate the time and attention of the members of this Committee on these matters of critical importance to PIABA members and the investing public as a whole.

 

II.     Role of the PIABA

PIABA is an international bar association comprised of attorneys who represent investors in securities arbitration and litigation. PIABA promotes the interests of the public investors in all securities and commodities arbitration forums, while also advocating for public education regarding investment fraud and securities industry misconduct. PIABA is a voluntary association whose members represent and advocate for investors harmed by fraud, misconduct, and the damage caused by members of the securities industry who put their interests ahead of their clients.  As a result of representing public investors, PIABA is in the unique position to uncover patterns of misconduct and regulatory inefficiencies that lead to customers being misled, misinformed, or mistreated.

 

PIABA also meets regularly with the Securities and Exchange Commission (“SEC”), NASAA, and securities regulatory groups to discuss and address investor protection issues. Further, our members and their clients have a strong interest in rules promulgated by the Financial Industry Regulatory Authority (“FINRA”) particularly relating to investor protection issues. As such, PIABA frequently comments upon proposed rule changes and retrospective rule reviews to protect the rights and fair treatment of the investing public.

 

III.     Summary of PIABA’s Written Testimony

The purpose of this hearing is to examine the role of self-regulatory organizations (SROs) in the U.S. markets including FINRA and MSRB. PIABA supports the concept of SROs as generally having a positive impact on the capital markets but remains increasingly concerned about whether today’s SROs have a positive impact on investor protection.  Because of our concerns, we believe there is a need for change and the adoption of additional safeguards. However, when SROs like FINRA and MSRB actually operate as intended and fulfill their investor protection and market integrity purpose, SROs have the potential to be a powerful force for good for investors and the market.

 

The Financial Industry Regulatory Authority (FINRA) is a non-profit SRO registered and supervised by the SEC but not part of the government. It serves as primary regulator for broker-dealers and its rules and regulations contour much of the investor protection landscape, and “FINRA’s mission is to protect investors and safeguard the integrity of our vibrant capital markets to ensure that everyone can invest with confidence.”[1]

 

PIABA believes that improvements need to be made to the SRO structure that increase investor protections and the integrity of the markets. PIABA has consistently worked to highlight investor concerns with regulatory inefficiencies and outline ways for improvement. PIABA regularly meets with FINRA executives and officers and makes its positions known through comments and letter writing. FINRA has oftentimes been responsive in the past to our concerns. However, more recently, FINRA’s actions have contradicted its stated purpose – Investor Protection – and PIABA has become increasingly concerned with recent actions by FINRA that will result in serious harm to investors. PIABA is concerned that FINRA is increasingly beholden to the interests of the industry (particularly the powerful and large members of the securities industry) at the expense of FINRA’s stated mission,

 

In particular, PIABA will cover the following key concerns with FINRA: (1) the independence of the FINRA Board; (2) dispute resolution in the FINRA Arbitration Forum (3) access to justice for investors, (4) senior safeguards and (5) reforms for greater investor protection.

 

IV.     FINRA’s Board of Governors, Investor Protection, and on-going PIABA Concerns

FINRA Board of Governors

 

PIABA has frequently stated that FINRA plays a vital role in regulating the securities industry. PIABA recognizes FINRA’s stated “mission is to protect investors and safeguard the integrity of our vibrant capital markets to ensure that everyone can invest with confidence.”[2]  We note that this is FINRA’s stated mission because its behavior, especially recently, falls short of this promise.

 

FINRA has a Board of Governors consisting of “industry” and “public” governors.  Its board contains twelve Public Governors, ten Industry Governors, and one seat for its Chief Executive Officer.[3] Its by-laws require that its Public Governors have no “material business relationship with a broker or dealer or a self-regulatory organization registered under the Act.”[4] In theory, Public Governors sitting on the governing board should counterbalance industry influence and provide an element of investor protection by giving the investing public representation and influence in FINRA’s governance.[5] Regrettably, FINRA’s Public Governors have often been difficult to distinguish from industry-elected governors. Indeed, FINRA has appointed persons as public governors, who have been formerly elected by the industry to serve in the industry. It has even had public governors that simultaneously served on FINRA’s board and the boards of entities regulated by FINRA.

 

The board’s composition and integrity matters because it makes significant policy decisions. These decisions “shape the industry and influences the costs the public pays for financial services as well as the protections investors enjoy.”[6] The Securities and Exchange Commission (SEC) has long recognized “the inherent potential for self-regulation to favor the interests of the securities industry over those of the investing public.”[7]

 

There have been longstanding concerns about FINRA’s board. Previously, SEC Commissioner Hester Peirce, when she was at  the Mercatus Center at George Mason University, and a nominee to the SEC, observed that “FINRA is not subject to mechanisms comparable to those that hold government regulators accountable to Congress, the president, and the public.”[8] She found that “FINRA’s version of self-regulation embodies a troubling independence from government, industry, and the public.”[9] This criticism is fair as FINRA often finds itself following its own inscrutable priorities and not behaving in a way that responds to investor needs.

 

Historically, the SEC has only barely supervised FINRA’s governance. A 2012 Government Accountability Office Report found that the SEC had “conducted limited or no oversight of . . . FINRA’s . . . governance and executive compensation.”[10] More specifically, between 2005 and 2010, the SEC conducted no oversight of FINRA’s transparency of governance.[11] With respect to FINRA’s Board of Governors, the SEC told the Government Accountability Office that it “periodically reviewed the composition of FINRA’s board to determine compliance with [self-regulatory organization] board-composition requirements.”[12] The SEC indicated that it had not “examined issues such as conflicts of interest or recusals related to FINRA’s governance.”[13]

 

It is PIABA’s position that the FINRA’s Board of Governors should be restructured to ensure that FINRA maintains focus on its mission to promote investor protection.

Mandatory Arbitration

 

Mandatory pre-dispute arbitration clauses are rampant throughout the consumer landscape. Whether a consumer pursues a claim against a credit card company, bank, cryptocurrency exchange, or their mobile service provider, mega-corporations widely impose upon consumers the requirement, without negotiation, of pre-dispute arbitration clauses. These pre-dispute arbitration clauses almost always require arbitration through a private provider of arbitration services like the American Arbitration Association (AAA) or Judicial Arbitration and Mediation Services (JAMS). The consumer arbitration rules used by private forums can sometimes provide for an inexpensive solution for consumers but procedurally rob them of critical procedural rights they would have in litigation, especially as it relates to discovery and prehearing dispositive motions. Likewise, the arbitrator pools in AAA and JAMS are the quintessential career arbitrators, who oftentimes have ties to the financial services industry or other large corporate clients and virtually all of whom are either lawyers or retired judges, making those arbitrator pools look far less like a jury of peers a consumer would have access to in a court of law.

 

There are many instances where consumers, including investors with claims against registered investment advisers (RIA) regulated by the SEC, cannot afford to bring their claims. Some RIAs abuse their privilege to incorporate arbitration clauses in their client agreements by using onerous clauses like requiring arbitration before JAMS, with three arbitrators, in New York. Such a clause would require an investor to commit to out-of-pocket costs of at least $100,000 just to pay for a forum in which to resolve their claims. This abuse robs investors of their rights to seek recompense and prohibits legitimate and viable claims from being pursued. It is an unfair abuse of contract law in an opaque space not understood by consumers and creates inequitable results to the detriment of investors.

 

FINRA Dispute Resolution lowers this financial bar, which is important. When an investor brings a dispute against their financial advisor and brokerage firm, those disputes must be brought in arbitration through the FINRA Office of Dispute Resolution. There are important differences between the private arbitration forums like JAMS, the AAA, and FINRA Dispute Resolution. Since the 1990’s the NASD, NYSE, and FINRA have worked with PIABA and other stakeholders to level the playing field for investors who are forced to bring their cases in what is essentially the securities industry’s trade association forum. For example, PIABA fought for years to end the use of unfair pre-hearing motions to dismiss except under very limited circumstances. PIABA also fought to balance the arbitrator pool by first ending the mandate that all three-member arbitration panels include an industry arbitrator and then worked hard with FINRA to expand the roster of available FINRA arbitrators so that the FINRA arbitrator pool reflected a more diverse population: the investor populace using the forum. PIABA fought for fewer lawyers and CPAs as arbitrators, and more regular folks or “Joe the Plumber” arbitrators who could at least understand the perspective of ordinary, hardworking investors all too often defrauded by bad brokers and unprotected by lazy brokerage firm compliance departments.

 

These changes over the years have made FINRA arbitration the preferred arbitration forum for most PIABA members and their clients. As the rank and file of FINRA members decreases with net migration to the investment advisory channel increasing year over year, our members now commonly bring their clients’ claims in numerous forums outside of FINRA, often yoked by unfair arbitration provisions containing hedge clauses and onerous fee shifting provisions. The issues related to registered investment adviser arbitration agreements are many and are well documented by the Securities and Exchange Commission.[14]

 

All of this is to say that arbitration through FINRA Dispute Resolution is the lesser of two evils. In particular, arbitration through FINRA still overwhelmingly favors brokerage firms. In 2025, investors prevailed in final arbitration hearings in FINRA less than 30% of time.[15] Said another way, the industry won more than seven out of ten times. Unfortunately, the tilt towards the industry is not an aberration. Investors fared even worse in 2024, winning only 26% of the final arbitration hearings. In 2023, investors won less than one in four arbitrations. Yet, other arbitration forums can be even worse for investors. I would like to provide statistics for you, but that is why industry members require the use of alternative forums: the arbitration outcomes are held secret to avoid the sort of study we can now conduct on FINRA arbitration outcomes.

 

Arbitration seems to be here to stay, as long as corporate America is allowed to force consumers into private arbitration to resolve disputes. FINRA has at least listened to and adopted some reasonable consumer protections over the years as outlined above, provided some level of transparency, and offers at least the possibility of SEC and congressional oversight. The worst outcome for investors would be that FINRA Dispute Resolution be disbanded, leaving brokerage firms to write their own pre-dispute arbitration provisions forcing investors into even more disadvantageous forums with ever withering rights and protections.

 

Recent FINRA Changes and Concerns

 

Over the last year PIABA members have grown increasingly concerned with recent changes by FINRA. Today, FINRA is promoting its FINRA Forward initiative. Unfortunately, FINRA-Foward has chosen the path towards securities industry appeasement and against the best interests of investors, seemingly to weather attacks against it by Project 2025 and as a reaction to litigation filed against it in the federal court system. FINRA-Forward appears to bow to the will of the securities industry in 2025 and early 2026 in ways not seen by PIABA since the 1990s.

 

The first serious change FINRA made to its arbitration program, which was done without notice or opportunity for public comment, was to change the requirements to serve as an arbitrator, narrowing the available arbitrator pool.  The securities industry has long complained of those they deem to be not sophisticated enough being on FINRA arbitration panels, as if juries in courtrooms around America are only comprised of lawyers and accountants. FINRA heeded the message from the securities industry to “professionalize” their arbitrator pool and made material changes in the dark of night. FINRA now requires that arbitrators must possess a four-year college degree and have at least five years of paid professional experience (unless those candidates have served in the financial services industry, in which case the college degree seems optional). PIABA firmly stands by its position which it has maintained for years: investors deserve arbitration panels that more accurately reflect their communities than the candidates industry prefers: the distanced, sterile, set of professional arbitrators unable to see the industry’s sales pitches as an ordinary investor would. Likewise, PIABA’s position has remained steadfast that it benefits investors to have well-trained arbitrators and, as the sponsor of the forum, that must be one of FINRA’s core responsibilities.

 

Although FINRA has contended these moves aim to increase “arbitrator quality,” the reverse may be true.  FINRA pays its arbitrators a relative pittance compared to other arbitration forums.  To the extent that it narrows the pool toward attorneys and professionals, only the least economically successful attorneys will have any economic incentive to participate as arbitrators.  In contrast, sharp firefighters, police officers, and others may have a more rational economic incentive to participate in the forum as arbitrators.

 

The next favor FINRA extended to the securities industry was in direct response to arbitrators who ruled against brokerage firms. FINRA Rule 12407(a) allows a party to make a request or a motion to the Director of Arbitration to remove an arbitrator from the list of proposed panelists prior to the parties submitting their arbitrator ranking forms under very limited circumstances. Recently, FINRA has granted requests by brokerage firms to remove arbitrators for the simple reason that those arbitrators issued a singular ruling against those firms previously. This is a drastic change to the equality of the arbitrator ranking process and allows brokerage firms to remove arbitrators from the pool in a given case without having to use one of their preemptory strikes available for each case. Further, FINRA’s interpretation of prior rulings in arbitration as bias is inconsistent with the well-developed case law under the Federal Arbitration Act. The concern here is that there do not appear to be any real circumstances where the liberalization of this rule could favor investors. FINRA’s recent execution of this rule only favors repeat players – brokerage firms and registered representatives who appear multiple times in different FINRA arbitrations. This is a one-sided interpretation, and it only benefits brokerage firms to the detriment of investors. It could also serve to decimate the already-thin pool of arbitrators if an arbitrator who ruled against a particular firm was forbidden from ever hearing another case involved that firm.

 

FINRA’s efforts to appease the securities industry to the detriment of investors appears likely to continue. On July 11, SIFMA sent a letter[16] to FINRA which identified roughly a dozen issues that SIFMA had with FINRA Dispute Resolution, with suggestions on how FINRA can “improve.” PIABA responded in kind.[17] SIFMA’s list of grievances included its desire to limit or eliminate the authority of arbitrators to award punitive damages; to rekindle the broad use of pre-dispute dispositive motions; the reintroduction of the mandatory industry arbitrator; and forum selection to arbitration forums outside of FINRA favoring the securities industry for certain kinds of cases. Simply put, the industry’s “wish list” would be a disaster for public investors putting them at further extreme disadvantage in attempting to pursue recovery for wrongdoing.

 

FINRA quickly acted on the securities industry’s list of grievances reflecting FINRA’s intent or willingness to undo thirty years of progress. Just earlier this week, FINRA released Regulatory Notice 26-06, a seventy-page opus containing 275 endnotes, purportedly directed at “modernizing FINRA Arbitration Rules”.[18] Despite platitudes about investor protection being at the core of its mission, Regulatory Notice 26-06[19] makes it clear that FINRA will return investor arbitration to the status quo ante from more than a generation ago. This new notice includes convoluted requests for comment directed at stakeholders on issues critical to investor protection and the fairness of FINRA arbitration including but not limited to: 1) Whether certain categories of customer disputes should be resolved through a different arbitration forum altogether; 2) Whether FINRA should expand the use of prehearing motions to dismiss and eliminate the “eligibility rule”; 3) Whether FINRA should bring back the industry arbitrator in all cases; 4) Whether FINRA should restrict discovery beyond that required by the limited Discovery Guide; 5) Whether FINRA should create an arbitration czar to whom arbitrators can to ask questions during the arbitration proceeding; 6) Whether FINRA should eliminate or limit punitive damages to protect the industry at the detriment of the investment public who are victims of egregious misconduct.

 

FINRA’s recent bend towards the securities industry is a real threat to investor rights, the fairness of its industry-sponsored arbitration forum, and presents a level of hypocrisy that is difficult to joust. Regulatory Notice 26-06 represents the securities industry’s wish list that would undo a generation of work between the securities industry, FINRA, PIABA, and other stakeholders.

 

This recent Notice is also emblematic of a trend with FINRA’s general regulatory notices and the FINRA Forward initiative. FINRA appears to have a new approach to Rule Making. Starting with FINRA Regulatory Notices 25-04, 25-06 and 25-07, the notices have became lengthy, unwieldy, and ambiguous.  In fact, on at least one occasion, PIABA members had to request a meeting with the FINRA general counsel’s office to try to determine the responsive information sought by the notice. FINRA has further been forced to extend additional response time on these notices. PIABA Responded to each of these notices.

 

Simultaneously, FINRA filed Regulatory notice 25-05 dealing with Outside Activities.  This notice was lengthy and included multiple attachments including a flow chart to attempt to explain the notice. PIABA also did respond to this notice. FINRA has proceeded to send this rule to the SEC in SR-FINRA-2026-001 with modifications that removed supervisory and recordkeeping requirements for investment adviser activity. The amendments to the Outside Activities rules will gut investor protections and reduce or eliminate requirements for supervision of some of the primary hotbeds of securities and investment fraud, which will likely lead to the proliferation of increased Ponzi schemes and other fraudulent activity. The response to these dramatic changes has been overwhelmingly negative, with the SEC receiving over eighty-five comments last month, and approximately sixty of those comments raising serious investor protection concerns. FINRA has also recently sent SR-FINRA-2026-004 directly to the SEC without providing an additional opportunity for notice and comment in the regulatory notice process with FINRA.

 

Unpaid Awards

 

Certain systemic problems have persisted with FINRA members and FINRA Dispute Resolution for decades. One of the most incendiary problems facing investors in forced FINRA arbitration is the scourge of unpaid arbitration awards. For decades, the small number of investors who are lucky enough to prevail in FINRA arbitration have too often received paper awards that are never paid. This is not a theoretical problem. It is documented, persistent, and corrosive to the integrity of our markets.

 

In 2024, a shocking 37 cents out of every dollar of FINRA Arbitration Awards issued to customers went unpaid, and one out of every four cases where damages were awarded went unpaid.[20] To be clear, in 2024, customers won their FINRA Arbitrations only 26% of the time. Out of that small percentage of wins, 37% of the amount awarded to those customers went unpaid. Between 2020 and 2024, approximately $80 million of FINRA Arbitration awards in favor of customers and retail investors went uncollected.[21] These statistics are merely the tip of the iceberg as they drastically understate the extent of the problem since most investor claims that would likely go unpaid are never pursued in the first place. Despite this known problem, FINRA and its Board of Governors last year announced that FINRA’s 2024 earnings were “better-than-expected” and issued $50 million in rebates for FINRA member firms.[22] The issue of unpaid FINRA Arbitration Awards has been a persistent problem, and despite its “Investor Protection” mandate, FINRA has proven it is unable to fix the issue by itself despite having the funds and tools to fix the unpaid awards problem.

PIABA has covered this problem for many years, publishing research and reports.[23] FINRA—and its predecessor self-regulatory organizations—have let this problem continue for far too long. A 2000 report from the U.S. General Accounting Office n/k/a Government Accountability Office (“GAO”) found that 49 percent of FINRA arbitration awards in favor of investors in 1998 went entirely unpaid by broker-dealers and an additional 12 percent were only partially paid.[24] The GAO recommended that the self-regulatory organizations “develop procedures addressing the problem of unpaid awards caused by failed broker-dealers.”[25] We now find ourselves more than twenty-five years later, however, and FINRA still has made no meaningful progress while unpaid FINRA arbitration awards continue to plague investors.

The impact of unpaid awards has been shifted to the American retirees and main street investors. Take for instance the story of Thomas and Diann Elliott a 75 and 72-year-old couple from Liberty, Illinois who operated their family farm for nearly 50 years. After having lost most of their life savings due to misconduct by their small independent broker-dealer, the Elliotts filed a FINRA Arbitration claim and litigated their case for nearly three years all the way through a contested final arbitration hearing. The Elliotts were awarded over $212,000 in 2025 by a unanimous panel of FINRA Arbitrators. Yet the broker dealer has not paid a penny of the award. There are far too many stories of hardworking families who have been devastated by fraudulent conduct or failures of the broker dealer industry, and when the investors do the right thing, pursue their claim, prevail and then are left with nothing.

I would ask that you consider Darrell and Joan Vincent from Fowler Illinois. They are a retired couple in their 70s who spent their careers working as a boiler operator for a soybean plant and a postal carrier. After being awarded over $450,000 to reimburse them from being victimized by securities fraud, they have recovered not as much as a single penny of the amount awarded. Kent and Nancy Crow, a couple in their 70s  who each spent decades working as a grain farmer and librarian, also pursued a claim in FINRA Arbitration and were awarded over $978,000. The Crows have recovered nothing from the award.

Take, for another example, Bruce Wilkerson. Mr. Wilkerson, a now 61-year-old retired NFL player who worked as a machinist after a decade of playing football and even winning a Super Bowl. Mr. Wilkerson trusted his hard-earned life savings to a FINRA broker dealer which abused that trust and allowed its representative to steal those funds. Mr. Wilkerson filed an arbitration claim and in March 2015, the arbitrators awarded Mr. Wilkerson his full losses of $610,000, as well as other statutory damages. Unfortunately, shortly before the award was issued, FINRA cancelled the broker-dealer, Resource Horizon’s registration. The broker-dealer had already failed to pay another arbitration award related to the same misconduct affecting Mr. Wilkerson and then failed to pay Mr. Wilkerson’s award as well.

These victims are investors who have lost their life savings, often retirement funds, and did everything they were supposed to do.  They followed the rules, hired a trusted financial advisor, and then found themselves required to file an arbitration claim. They saw the arbitration through to the end, were about the rare few whose arbitration panel agreed that they were wronged or defrauded, and yet they were unable to collect or recover their lost savings.

In response to this long term and pervasive scourge, in 2010, Congress enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act, Section 964, and identified ten specific oversight priorities for the SEC’s oversight of FINRA, one of which was “arbitration services.” The GAO was to periodically report on the SEC’s performance of its oversight. According to a 2021 GAO report, the SEC neglected to perform necessary oversight of FINRA and its arbitration process.

FINRA, to its credit, does track the issue of unpaid awards for FINRA member firms. However, other financial services professionals operate as SEC or state registered investment advisory firms. And, unlike FINRA, there is no uniform tracking or reporting with regards to investment advisory firms, accordingly we find little data regarding the extent of the same issue in the investment advisory space.

Simple solutions, like insurance requirements or an investor recovery pool have long been offered and even acknowledged by FINRA, but FINRA has failed or refused to take action.[26] Most investors have no idea that insurance is not required or that there is no backstop protection for brokerage firms that commit misconduct, and most investors are shocked that they have to maintain auto insurance to drive their cars but there is no requirement for the financial professionals who “drive” the management of main street investor’s retirement nest eggs.

Investor Recovery Pool

 

Regardless of how strong the investor protection rules, regulations, and laws are, they are meaningless absent an investor’s ability to actually recover money when those rules, regulations, and laws are violated. As former SEC Chairman Jay Clayton aptly summarized: “What dollars do you actually collect when somebody has done you harm? Because you can have a really strong standard, but if there are no dollars there, that’s a problem.”[27] FINRA recognized the creation of an investor recovery pool as an approach “to cover unpaid customer arbitration awards” noting that the “fund could be established by Congress” and “could be funded by assessments of brokerage industry participants directly” or “indirectly through a FINRA funding mechanism.”[28]

 

The Investor Recovery Pool is feasible. FINRA’s fines ordered in every year from 2020-2024 have more than doubled the amount of unpaid awards each year. PIABA has previously estimated that annual assessments as low as $23 per FINRA-registered broker could cover unpaid FINRA arbitration awards.[29] The investor recovery pool’s benefit to aggrieved investors would far outweigh the modest cost to FINRA or its members – or the taxpayers at large who now have to pay for the social services needed for the newly broke retirees. Creation of an investor recovery pool would also advance FINRA’s investor protection mandate and help restore trust and confidence in the brokerage firm industry. Coupling an investor recovery pool with insurance requirements will also further reduce the cost and or funding burdens on an investor recovery pool.

 

Insurance

 

A recent paper tackled this issue finding that the unpaid arbitration award problem has existed for decades across both broker-dealers and registered investment advisers.[30] Although bad brokerages might generate more liability than their insurance policy would cover, this does not mean some measure of insurance would not help. Some insurance requirements would offer both increased odds of recovery and market discipline for the riskiest brokerage firms. If no insurance company will write an affordable policy for certain brokerages, it likely means that the brokerage should not be allowed to manage the public’s assets. When insurance companies simply will not take the bet, why should the worst brokerages be allowed to gamble with other people’s money.

 

Government studies, state enforcement data, and arbitration outcomes all confirm the same pattern: firms collect fees and commissions from retail customers, but when misconduct leads to liability, some lack sufficient capital or insurance to satisfy awards. The result is devastating for harmed investors. They incur legal costs, prevail after a full evidentiary hearing, and yet receive nothing. A dispute resolution system without a meaningful recovery mechanism undermines public confidence in securities regulation. Mandatory professional liability insurance directly addresses this structural defect.

 

First, insurance materially increases the likelihood that prevailing investors recover meaningful compensation. It does not guarantee full recovery in every case. It does ensure that arbitration awards are more than symbolic.

 

Second, insurance creates private market discipline. Insurers assess risk. Firms with repeated misconduct, concentrated supervision problems, or aggressive sales practices face higher premiums or reduced access to coverage. In this way, insurance markets price misconduct and incentivize better compliance before harm occurs. Insurance can operate as a forward-looking risk control mechanism, supplementing regulatory enforcement and arbitration.

 

Critics often argue that insurance mandates would reduce access to financial advice. The available empirical evidence does not support that claim. For example, when Oregon and Oklahoma required certain state-registered advisers to maintain errors and omissions insurance, there was no material reduction in the number of advisory firms operating in those states. Similarly, when a major custodial platform required insurance from advisory firms, the market adapted without issue.

 

Professional liability coverage is a manageable cost relative to advisory revenue models. It is common in other professions that handle consumer assets or provide fiduciary services. The securities industry should not be exempt from baseline risk-transfer requirements that protect the public.

 

Mandatory insurance does not represent punitive regulation. It is a pragmatic safeguard. It ensures that when investors win their cases, they have a realistic opportunity to collect. It strengthens incentives for firms to supervise effectively. And it restores credibility to the arbitration system that Congress has permitted to remain the primary forum for retail securities disputes. Retirement savings, education funds, and lifetime earnings are too important to rest on the solvency of thinly capitalized firms. A financial advice industry that handles trillions of dollars in household wealth should carry baseline professional liability coverage.

 

The Committee has an opportunity to align investor protection with basic risk management principles. Mandatory broker-dealer insurance and a corresponding investor recovery pool are not radical. These reforms to resolve the pervasive unpaid awards problem are responsible and long overdue.

Holding Companies

FINRA currently permits non-FINRA member holding companies and individual non-FINRA registered control persons to own and control FINRA-registered broker-dealers while remaining outside FINRA’s regulatory jurisdiction and exempt from mandatory customer arbitration. Despite these holding companies, in many cases, owning the majority interest if not being the sole and exclusive owner of broker-dealers, being listed as “Control Persons” on Form BD filings, and exercising complete operational control over member firms, FINRA claims it lacks authority to regulate these entities or compel them to arbitrate customer disputes.

 

PIABA has met with FINRA and outlined the regulatory gap.  This regulatory gap is being systematically exploited through a scheme that operates as follows: (1) a holding company owned by FINRA-registered individuals acquires a broker-dealer; (2) the broker-dealer engages in sales practices that harm customers; (3) the profits derived from those very sales practices are passed from the broker-dealer to its unregulated holding company; (4) as customers’ claims accrue—and even as they file claims in FINRA arbitration—but before awards are paid, the holding company closes the broker-dealer or transfers profitable operations to another entity it controls; (5) investors are left holding uncollectible judgments against the shell broker-dealer while the same individuals continue operating in the securities industry under FINRA membership.

 

One recent matter illustrates how this scheme operates with apparent FINRA acquiescence. Center Street Securities, Inc. (“Center Street”) was owned by Center Street Holdings, Inc. (“CSH”), which was listed as a Control Person on Form BD. CSH was owned primarily by the firm’s president, Jack Thacker, a FINRA-registered Associated Person. In late 2020/early 2021, Arete Wealth, Inc.—owned and controlled by FINRA-registered individuals including CEO Joshua Rogers—acquired CSH through a stock purchase agreement. Arete issued press releases announcing the firms would “strategically combine their entities” and operate under the Arete Wealth brand. This represented to the market that Arete was assuming responsibility for Center Street’s operations and, by implication, its obligations.

 

After Center Street faced dozens of FINRA arbitration claims in 2022-2023 for the same unsuitable sales practices FINRA had sanctioned Center Street for in 2014 (FINRA AWC No. 2012034936004), Arete’s registered owners “abandoned” the merger plan. Instead, they strategically shut down Center Street Securities, filed Form BDW, and placed the firm into a “Delaware Liquidating Trust.”

 

Center Street ceased defending arbitration cases and refused to comply with discovery orders. This damage was immediate and ongoing, with more than $2 million in unpaid FINRA Awards in January and February 2025 alone for one such former FINRA Member owned by a holding company. (See FINRA Case Nos. 22-01937, 22-01620, and 22-02391, totaling almost $2.18 million in awards on which investors cannot collect.) These victims are not sophisticated institutional investors—they are retirees, farmers, and working Americans who relied on the regulatory system to protect them.

Meanwhile, Arete Wealth Management, LLC (CRD #44856) continues operating as a FINRA member with the same controlling individuals. These individuals enjoy all benefits of FINRA membership and registration as Associated Persons while investors who won awards against their affiliated entity received no restitution for the harm they suffered.

 

FINRA has indicated it will not act without your SEC direction, claiming this involves “control person” definitions that require SEC approval. We have also identified a gap in FINRA Rule 1017, which governs “continuing membership applications” (CMAs) for changes in ownership of broker-dealers. That Rule requires disclosure of unpaid awards and pending settlements but does not address (1) pending arbitration claims that have not yet resulted in awards; (2) corporate restructurings, spin-offs, or asset transfers designed to avoid liability; (3) use of shell companies and non-registered entities to exercise control while avoiding arbitration obligations; or (4) liability of holding companies and owners for awards against affiliated entities.

When FINRA attempts to assert jurisdiction over holding companies under FINRA Rule 1011(b)(3)—which defines them as “associated persons” when they control members—arbitration panels routinely refuse to accept jurisdiction, and holding companies successfully obtain restraining orders in federal court.

FINRA should require all holding companies, control persons, and direct or indirect owners of FINRA members to agree to FINRA jurisdiction over disputes arising from the member firm’s activities. Further, FINRA should establish that holding companies, control persons, and owners with 25% or greater ownership interest are jointly and severally liable for arbitration awards against member firms they own or control.

 

V.     Senior Safeguards

Senior financial exploitation is not a niche problem. It is not a series of isolated incidents. It is a national crisis. The numbers alone should demand action. In 2024, the FBI reported that Americans over the age of 60 lost $4.8 billion to fraud[31], a staggering figure that does not take into consideration that sums lost by people too embarrassed to report their experiences. The FTC, in its most recent annual report to Congress, found that older adults’ reported fraud losses have quadrupled since 2020, rising from $600 million to $2.4 billion in 2024 alone.[32] But because most fraud goes unreported, the FTC estimates the true losses experienced by older adults in 2024 may be as high as $81.5 billion. FinCEN’s analysis of Bank Secrecy Act data found $27 billion in suspicious activity linked to elder financial exploitation in a single year.[33] Investment scams, the category most likely to touch a brokerage account, were the leading driver of losses among older adults, and they are accelerating. These are not abstract statistics. Behind every number is a retired teacher, a widowed grandmother, a veteran who served this country. Americans who did everything right, saved for decades, and had it taken from them.

 

Older Americans are being targeted at unprecedented levels by increasingly sophisticated fraud schemes. Fraudsters go where the money is, and the wealth of the retirees in this country is held at FINRA-member brokerage firms. The national focus must therefore be placed squarely on responsibilities of these institutions. They hold the assets, employ the personnel, and operate the surveillance systems best positioned to detect and prevent exploitation before it causes irreversible harm. When a senior investor loses a lifetime of savings, it is the brokerage firm that had the clearest opportunity to intervene. They must be given the tools to protect their clients and held accountable when they fail.

Financial exploitation of the elderly is not limited to the unsophisticated or uninformed. Members of our organization represent doctors, engineers, lawyers, business owners, and executives. Many of these individuals held successful careers and built businesses. Yet they, too, fall victim to modern financial scams. The reason is simple: the fraudsters have evolved. Today’s schemes are technologically advanced, emotionally manipulative, and highly coordinated. They exploit fear, isolation, urgency, and trust. They impersonate government officials, romantic partners, cryptocurrency experts, financial institutions, and even family members. They use spoofed phone numbers, artificial intelligence, and convincing documentation and replicated platforms that look like the real thing. The result is devastating. Lifetimes of savings can disappear in days or even minutes.

When seniors lose money to financial exploitation, the harm is not solely economic. It strips them of independence, dignity, and security. It can force delayed retirement, diminished healthcare options, and reliance on family members and social services. In some cases, it leads to depression, severe emotional distress, and suicide.

FINRA has taken some steps to address this crisis. Certain rules were adopted in response to mounting concerns about senior investor abuse. These include the general rules of supervision and good faith business practices; supervision rules that work in conjunction with Rule 4512, which addresses trusted contact persons; and Rule 2165, which permits temporary holds on disbursements where financial exploitation is suspected. These rules were well-intentioned and serve as an acknowledgement from our securities regulators that the problem is serious and widespread. However, the FINRA rules as they currently exist do not go far enough.

FINRA Rule 4512

Under FINRA Rule 4512, brokerage firms are required to make reasonable efforts to obtain the name and contact information of a trusted contact person for a customer’s account. When properly implemented, trusted contacts are one of the most effective tools available to interrupt exploitation before it becomes irreversible. When a member of a firm’s fraud department contacts a trusted person to flag a suspicious transaction, it introduces something that fraudsters cannot afford: time. A few hours, even a single phone call between a worried son or daughter and their parent, is often enough to break the psychological hold a scammer has carefully constructed. That brief pause, combined with the voice of a trusted family member or friend, can cut through the fear, urgency, and manipulation that fraudsters rely upon, and give the senior investor the clarity needed to step back from a devastating financial decision.

But trusted contacts cannot protect investors if firms fail to obtain them in the first place. Our members have found that many firms are not making meaningful or consistent efforts to secure trusted contact information. In many instances, accounts are opened or maintained without any trusted contact on file. This is not merely an oversight. It reflects a structural failure in how firms approach the requirement. When trusted contact information appears as an afterthought buried in the fine print of a lengthy account application, with no meaningful explanation offered to the customer, it should come as no surprise that the field is left blank.

Firms must do more than make the form available. They must affirmatively engage their customers in a conversation about what a trusted contact is, why it matters, and how it could one day protect them. If a financial advisor never explains to a customer what a trusted contact is, why it exists, or why naming one could prove critical, it is difficult to see how any firm could credibly claim that “reasonable efforts” were made to comply with Rule 4512. A checkbox on page eleven of an account application is not a reasonable effort. It is the appearance of compliance. That distinction matters enormously when a senior’s life savings is on the line. We have not seen FINRA address this with its members. And a rule without robust enforcement does not meaningfully protect investors.

FINRA Rule 2165

PIABA’s primary concern with FINRA Rule 2165 is its permissive nature. The rule allows a brokerage firm to place a temporary hold on certain disbursements if it has a reasonable belief that financial exploitation has occurred, is occurring, or will be attempted. The operative word is “allows.” Firms may place a hold. They are not required to do so.

PIABA believes this approach is insufficient. Many of today’s most devastating schemes (pig butchering, crypto fraud, imposter scams) are orchestrated overseas. Once funds leave the brokerage account, they are often gone permanently. This is a compelling argument for why the hold must happen at the firm level before funds are disbursed.

When a brokerage firm has a reasonable belief of fraud or abuse, it should have an affirmative duty to act. That duty should include placing a temporary hold on suspicious disbursements and contacting a trusted person. Such a requirement would not be without precedent. It would bring FINRA into alignment with a growing body of state law that already imposes mandatory reporting obligations on broker-dealers and investment advisers. The majority of states have enacted laws specifically requiring broker-dealers and investment advisers to report suspected elder financial exploitation and authorizing them to temporarily delay disbursements. The NASAA Model Act, which has served as the foundation for much of this state-level legislation, goes further than FINRA’s current framework by mandating that qualified individuals, including broker-dealer agents and compliance personnel, promptly notify both Adult Protective Services and the state securities regulator upon a reasonable belief of exploitation. Congress has also recognized the value of incentivizing reporting through the Senior Safe Act, which provides immunity to firms that report suspected exploitation in good faith. It would be incongruous to allow the federal self-regulatory framework governing these same firms to remain purely permissive when states, NASAA, and Congress have all moved in the direction of affirmative obligation. FINRA should follow that lead.

 

Training Frontline Workers

 

Some brokerage firms dedicate additional personnel and training to elder abuse detection. They have surveillance systems designed to flag unusual activity. They hold themselves out as trusted stewards of their customers’ assets. In light of these resources and responsibilities, it is appropriate to require affirmative action when red flags arise.

 

Training is therefore critical. As far back as FINRA Notice to Members 09-64, firms were warned against falling into a false sense of familiarity and routine in dealing with customers. Consider the long-time client who has walked into the same branch office for years, greeted by the same faces, exchanged the same pleasantries. When that client walked in with wire instructions that would ultimately drain his life savings into the hands of scammers, the employee who took the instructions hesitated to probe further. She knew him. She did not want to seem presumptuous. She did not want to make him uncomfortable. And so she processed the wire. That discomfort, that misplaced deference, cost him over $3 million, and in the end, his life as well. The quality and depth of training across the industry remains inconsistent. Some firms invest heavily in educating frontline personnel to detect, prevent, and escalate indicia of fraud. Others provide minimal or perfunctory instruction.

 

Another persistent and troubling failure in frontline training is the assumption held by some that certain clients are simply too sophisticated to be deceived. Our members see this often – an advisor whose client is a physician, an attorney, a retired executive, or a former judge has initiated a large and unusual wire transfer. Rather than pausing to ask questions, the advisor processes the transaction without concern. The client is smart, the advisor reasons. The client knows what he is doing. That assumption is dangerous. And it is wrong.

 

Sophistication in a profession does not confer immunity from psychological manipulation. Fraudsters do not select their victims based on career achievement. They select them based on vulnerability, isolation, and access to assets. The schemes that reach brokerage accounts today are not crude. They are carefully engineered to bypass rational decision-making. They exploit grief, loneliness, fear, and trust. A retired surgeon who has spent forty years saving lives is no less susceptible to a convincing impersonator than anyone else, and may, in fact, be more susceptible, precisely because no one around him expects it. Too often, advisors dismiss warning signs because they believe their client is too savvy to be fooled.

 

Frontline personnel are the first line of defense. They are the individuals who must notice unusual withdrawal patterns, sudden wire requests, changes in demeanor, or the presence of a new third party exerting influence. Without thorough training, those warning signs may go unrecognized or unaddressed.

 

PIABA urges that greater emphasis be placed on mandatory, meaningful training for all customer-facing personnel. Training should include not only how to recognize red flags, but also how to escalate concerns, document suspicions, and act decisively under supervisory procedures.

 

In summary, we respectfully recommend the following:

 

First, FINRA should issue formal regulatory guidance defining what constitutes a “reasonable effort” under Rule 4512. The current standard is undefined, and that ambiguity has allowed firms to treat a buried checkbox on a new account form as sufficient. It is not. FINRA should issue a Regulatory Notice specifying that compliance with Rule 4512 requires, at minimum, an affirmative and documented conversation with the customer explaining what a trusted contact is and how the designation may be used, a record of that conversation retained in the customer’s file, and a periodic follow-up no less than every three years to confirm or update the trusted contact information.

 

Second, FINRA should amend Rule 2165 to convert its permissive “may” language into a mandatory “shall” obligation. Where a member has a reasonable belief that financial exploitation of a specified adult has occurred, is occurring, has been attempted, or will be attempted, the member shall place a temporary hold on the disbursement of funds or securities from the account, and shall notify the trusted contact person designated under Rule 4512, if one has been identified, or shall take other reasonable actions to respond to the attempted exploitation or fraud and to protect their customers. Replacing “may” with “shall” is a targeted, surgical change that transforms a voluntary tool into an enforceable protection.

 

Third, FINRA should adopt mandatory training requirements for all customer-facing personnel at member firms. FINRA should establish a baseline curriculum, developed in coordination with NASAA and the SEC, that all associated persons with direct customer contact must complete on an annual basis. That curriculum should include recognition of the behavioral and financial red flags identified in FinCEN’s 2022 Advisory, internal escalation protocols, documentation requirements when exploitation is suspected, and specific guidance on how to engage customers when a suspicious

 

VI.     Access to Justice

As outlined above, customers of FINRA members are currently required to go to FINRA arbitration to resolve any disputes they may have with their FINRA registered member.  In many cases this results in an unfair advantage to the FINRA member.

The investors face limited arbitrator pools that continue to not look like members of their peer group. They also face a potentially lengthy process and at times cannot get all parties into the same forum to litigate.  Further, as outlined above, even if an investor wins, their award has a one in four chance of going unpaid.

 

For these reasons, PIABA supports a prohibition of mandatory arbitration provisions in broker, dealer, or other FINRA-member agreements.  Certainly, PIABA recognizes that arbitration can still be a valuable tool and provide some benefits. However, we believe that after a dispute has arisen, the investor should have a right to choose the arbitration, court, or forum they would like to use.  This will also act to serve as further accountability for the integrity of the arbitration system.

 

VII.     Reform

Office of Investor Advocate

 

FINRA should be required to have an independent Investor Advocate that plays a similar role within FINRA as the SEC Investor Advocate performs at the SEC.  This office would assist in investor protection issues and view all issues from the perspective of investors.  The Investor Advocate role could provide a way to assist investors, review pending rules, and propose meaningful changes within FINRA.

 

Strengthen SEC oversight

 

The SEC should be required to provide more consistent oversight of FINRA and the MSRB. This should include public reporting of exam findings.  The exams and oversight should be subject to FOIA and allow the investing public confidence in the capital market structure.

 

Enhance Transparency

 

BrokerCheck and Unified Database

 

FINRA maintains the BrokerCheck system.  FINRA has adopted rules for “disclosing information about brokerage firms and investment professionals registered with FINRA…to help investors determine whether to conduct, or continue to conduct, business with these brokerage firms and investment professionals.”[34]  The BrokerCheck system gives you a snapshot of the broker’s employment history, regulatory actions, and investment-related licensing information, arbitrations and complaints.

 

This is a beneficial resource for the investing public.  However, for an accurate picture of financial professionals, individual investors also must review the SEC Action Lookup-Individuals (SALI), Investment Adviser Public Disclosure (IAPD), and contact relevant state securities regulator where a salesperson maybe licensed.

 

Each of these databases can disclose different relevant information about the licensed securities professional. This is an increased burden on the reasonable investor to be required to review and understand all information on these sites.

 

A combined database with all information should be required.  This will assist investors and should assist them in making a decision on utilizing a licensed securities professional.

 

Expungement

 

The Financial Industry Regulatory Authority (“FINRA”) works with state securities regulators to maintain a database, known as the Central Registration Depository (“CRD”), of information on individuals working as current and former registered representatives in the brokerage industry. Complaints by investors, for example, are included in the CRD records. Those records can be accessed by the public through FINRA’s BrokerCheck tool on FINRA’s website, as well as obtained from some state securities regulators. FINRA and state and federal securities regulators actively encourage investors to use FINRA’s BrokerCheck tool and look for customer complaints when deciding whether to hire a particular broker to manage the customer’s life savings. Therefore, as FINRA recognizes, it is important that the information on the CRD system, and by extension BrokerCheck, be complete and accurate. To remove customer complaint information from the CRD system, a broker must request that the information be expunged. FINRA instructs arbitrators that customer complaints should be removed from a broker’s CRD only in extraordinary circumstances. FINRA’s rules permit expungement in only a very narrow set of circumstances.

 

As a result of the advocacy of many entities including NASAA, PIABA, and the PIABA Foundation, FINRA has made significant changes to the broker expungement process.  These changes resulted in state securities regulators receiving notification and being allowed to participate in the straight in expungement process.  In addition, previous customers now receive notice and can participate in the process.  These positive changes should be recognized.  However, there is still far more work to do in this area.  While the expungement rate for this supposedly “extraordinary” remedy used to be granted 90% of the time it was requested,[35]  FINRA’s statistics for 2025 indicate that expungements have still been granted more than 68% of the time.[36]  The brokerage industry prevails at a similar win rate on both expungements and in defeating customer claims. And valuable information regarding customer complaints continues to be erased at alarming rates.

 

In one recent case example, a registered representative sought to have the case expunged from their CRD record. The original claimant was notified pursuant to the new rules and made the decision to contest the expungement and even bring an expert witness to confirm the accuracy of the claim.  The arbitrator panel in this expungement case was reluctant to hear anything about the initial matter and prior proceedings.  The claimant insisted on being afforded with the opportunity to present evidence and was ultimately allowed to put on testimony from both an expert witness and the claimant after delays by the arbitration panel.  The panel still granted the expungement request and appeared irritated that the claimant appeared to contest the matter.

 

This expungement process should be modified to guarantee a more rigorous process that protects the previous victims and the future investing public.  Granting an expungement should be an extraordinary measure.

 

VIII.     MSRB Reforms

PIABA members do not typically take as active a role with the MSRB.  However, we do occasionally comment on pending MSRB rules, and PIABA members often utilize resources provided by MSRB including important data and information made available through EMMA. PIABA recognizes that MSRB can serve similarly important functions to FINRA when it operates consistent with its stated purpose.  We have found their notice and comment period similar to the traditional FINRA process when we have commented, and MSRB appears to often track similar proposals to those of FINRA.

 

PIABA would encourage Congress to consider implementing similar structure and procedural changes for MSRB to those of the FINRA changes discussed above.

 

IX.     CONCLUSION

Thank you again for the opportunity to testify. I hope I have provided a helpful overview of the S

[1] FINRA, About FINRA (last accessed March 2, 2025), available at https://www.finra.org/about.

[2] About FINRA, FINRA, http://www.finra.org/about (last visited February 28, 2026).

[3] See FINRA, FINRA Board of Governors, http://www.finra.org/about/finra-board-governors, (last visited Februay 28, 2026) (“FINRA’s Board is currently composed of 23 industry and public members, with 10 seats designated for industry members, 12 seats designated for public members and one seat reserved for FINRA’s Chief Executive Officer”).

[4] FINRA, By-Laws of the Corporation art. I, § tt.

[5] Andrew Stoltmann & Benjamin P. Edwards, FINRA Governance Review: Public Governors Should Protect the Public Interest (Public Investors Arbitration Bar Ass’n, Nov. 15, 2017), https://piaba.org/report-finra-governance-review-public-governors-should-protect-public-interest/). Attached hereto as Exhibit A.

[6] Id.

[7] Referencing SEC, Report Pursuant to Section 21(a) of the Securities Exchange Act of 1934 7 (1996), https://www.sec.gov/litigation/investreport/nd21a-report.txt [hereinafter SEC, 21A Report].

[8]  Hester Peirce, The Financial Industry Regulatory Authority: Not Self-Regulation after All 21, Mercatus Working Paper, Jan. 2015, https://www.mercatus.org/system/files/Peirce-FINRA.pdf.

[9] Id. at 29.

[10] U.S. Gov’t Accountability Office, GAO-12-625, Securities Regulation: Opportunities Exist to Improve SEC’s Oversight of the Financial Industry Regulatory Authority 7 (2012).

[11] Id.

[12] Id. at 16.

[13] Id.

[14] Securities and Exchange Commission: Response to Congress: Mandatory Arbitration Among SEC-Registered Investment Advisers. As Directed by the  House Committee on Appropriations, H.R. Rep. No. 117-393 (June 27, 2023).

[15] FINRA, Dispute Resolution Statistics (last accessed March 1, 2026), available at https://www.finra.org/arbitration-mediation/dispute-resolution-services-statistics

[16] Securities Industry and Financial Markets Association, Letter From SIFMA to FINRA re: Recommendations for FINRA Arbitration (July 11, 1025), available at https://www.sifma.org/wp-content/uploads/2025/07/SIFMA-Letter-to-FINRA-re-Arbitration-2025.07.11.pdf .

[17] Public Investors Advocate Bar Association, Response to SIFMA Recommendations for FINRA Arbitration (August 4, 2025), available at https://piaba.org/wp-content/uploads/2025/08/Sifma-Response-842025-FINAL.pdf.

[18] https://www.finra.org/rules-guidance/notices/26-06

[19] https://www.finra.org/rules-guidance/notices/26-06

[20] FINRA, Statistics on Unpaid Customer Awards in FINRA Arbitration (last viewed March 1, 2026), available at https://www.finra.org/arbitration-mediation/dispute-resolution-statistics/statistics-unpaid-customer-awards-finra-arbitration.

[21] Id.

[22] Mari Nicholson, FINRA Returns $50 Million in Regulatory Fees to Member Firms, AltsWire (July 2, 2025), available at https://altswire.com/finra-returns-50-million-in-regulatory-fees-to-member-firms/.

[23] See. Hugh D. Berkson, PIABA Report: Unpaid Arbitration Awards, a Problem the Industry Created — a Problem the Industry Must Fix((Public Investors Arbitration Bar Ass’n, Feb. 25, 2016), https://piaba.org/wp-content/uploads/2016/02/Unpaid-Arbitration-Awards-A-Problem-The-Industry-Created-A-Problem-The-Industry-Must-Fix-February-25-2016.pdf. Attached hereto as Exhibit B; Stoltmann, Andrew, and Hugh D. Berkson.  Unpaid Arbitration Awards: The Case For an Investor Recovery Pool (Public Investors Arbitration Bar Ass’n March 7, 20180, available at: https://piaba.org/wp-content/uploads/2024/07/REPORT-Unpaid-Arbitration-Awards-March-7-2018.pdf.  Attached hereto as Exhibit C; Berkson, Hugh D., & Meyer, David P. PIABA Report: FINRA Arbitration’s persistent unpaid award problem: PIABA’s third report concerning FINRA’s refusal to tackle the unpaid arbitration award problem head-on (third report) (Pulic Investors Advocate Bar Association, September 29, 2021). https://piaba.org/wp-content/uploads/2024/07/PIABA-Report-FINRA-Arbitrations-Persistent-Unpaid-Award-Problem-September-29-2021.pdf). Attached hereto as Exhibit D.

[24] U.S. Gen. Accounting Office, GAO/GGD-00-115, Securities Arbitration: Actions Needed to Address Problem of Unpaid Awards at p. 5 (2000), https://www.gao.gov/assets/ggd-00-115.pdf.  [“GAO 2000 Report”].  FINRA’s data also shows that nearly $200 million in awards went uncollected between 2012 and 2016.  FINRA, Discussion Paper—FINRA Perspectives on Customer Recovery at p.7 (Feb. 8, 2018), https://www.finra.org/sites/default/files/finra_perspectives_on_customer_recovery.pdf.

[25] See GAO 2000 Report, supra footnote 5, at 9.

[26] FINRA Discussion Paper – FINRA Perspectives on Customer Recovery, FINRA (Feb. 8, 2018), https://www.finra.org/sites/default/files/finra_persepctives_on_customer_recovery.pdf.

[27] Crypto News, Virtual Currencies: The Oversight Role of the U.S. Securities and Exchange Commission and the U.S. Commodity Futures Trading Commission, YOUTUBE (Feb. 6, 2018), https://www.youtube.com/watch?v=NGgg_dXBpq0 (SEC Chair Jay Clayton, testifying before the Senate Banking, Housing and Urban Affairs Committee).

[28] FINRA Discussion Paper – FINRA Perspectives on Customer Recovery, FINRA (Feb. 8, 2018), https://www.finra.org/sites/default/files/finra_persepctives_on_customer_recovery.pdf

[29] Andrew Stoltmann & Hugh D. Berkson, PIABA Report: Unpaid Arbitration Awards – The Case for an Investor Recovery Pool (Public Investors Arbitration Bar Ass’n Mar. 7, 2018), available at https://piaba.org/wp-content/uploads/2024/07/REPORT-Unpaid-Arbitration-Awards-March-7-2018.pdf.

 

[30] Adam J. Gana & Benjamin P. Edwards, The Insurance Solution for Financial Advice Failures, 14 Mich. Bus. & Entrepreneurial L. Rev. 1 (2025).

[31] 2024 IC3 Annual Report, available at https://www.ic3.gov/AnnualReport/Reports/2024_IC3Report.pdf.

[32] Protecting Older Consumers 2024–2025 A Report of the Federal Trade Commission, available at https://www.ftc.gov/system/files/ftc_gov/pdf/P144400-OlderAdultsReportDec2025.pdf.

[33] Interagency Statement on Elder Financial Exploitation, available at https://www.fdic.gov/interagency-statement-elder-financial-exploitation.pdf.

[34] About Broker Check, https://www.finra.org/investors/investing/working-with-investment-professional/about-brokercheck/faq (Last checked, February 28, 2026).

BrokerCheck, https://brokercheck.finra.org, (Last Checked, February 28 2027=6).

[35] David P. Meyer, Jason R. Doss & Lisa Bragança, PIABA & PIABA Found., Updated Study on FINRA Expungements: A Seriously Flawed Process That Should Be Fixed Now to Protect the Integrity of the Public Record, p. 5 (2021), https://www.sec.gov/comments/sr-finra-2020-030/srfinra2020030-8815751-238026.pdf,

[36] https://www.finra.org/rules-guidance/key-topics/expungement-of-dispute-information#statistics (last reviewed March 2, 2026).

FULL NAME

Dolores

How has this loss affected your retirement plan?

I invested approximately one third of my retirement IRA funds into this investment. Because I have had cancer, I am not able to purchase my own life insurance. This policy was recommended to me by my my advisor because it could be purchased for my children and it would provide both life insurance and an option to take the funds as supplemental income when they reached retirement age. My goal was to leave something enduring for my children, and I have no other funds to use now to accomplish that goal. I did not understand that these funds were going to be used for anything else other than paying premiums for Minnesota Life. I asked about the role of Gold Star and was told they were the “holding” company and would keep the funds in interest-earning accounts and would manage the funds and payments to Minnesota Life for four years or until the funds were gone. My advisor needs to be held accountable for his role in these losses. He misrepresented the policies that were sold to me.

John

COMPLETELY DEVASTATED! Currently have only pension and social security. Just enough to pay bills and have a “little” fun. We were planning on the dollars from this investment which My advisor predicted would be $2,000 to $3,000 per month. That was to be a substantial amount of dollars to add to our small income. During retirement, our plans were to travel, visit out-of-state friends and family which now must be cut out. The only time these things can be done is in extreme emergencies. Living on such a reduced income, has totally eliminated our retirement expectations. Even going out to dinner is now something that must be budgeted and done very infrequently. Our saving during our younger years with four children was difficult to say the least. To have someone rob us of our future is something no one ever plans for. When we learned of this robbery, our feelings cannot be fully expressed. Physically it has affected our nightly loss of sleep; ALWAYS on our mind whenever financial responsibilities come into day to day life; worry over how to finance if large financial responsibility pops up (i.e. new car needed/repairs to car/home repair needed). Getting up in years, we also worry about medical responsibilities. We currently are in good health but that is not to say how we could financially cope with large medical/dental bills if need would arise. There just are no extra dollars to provide for unexpected expenses. That is what our “retirement” funds were to take care of. Since we can basically kiss that good buy, our financial future looks bleak. We anticipate these feelings of despair will grow as we age. Since we cannot depend on our social security to increase, our finances can and will only go backwards.

Michael

Elizabeth

Earl

Bobby

Alan

Diane

Paul and Susan

Mary

Jane

Jerome

Stanley

Debra

Devon Jr & Barbara

Glenn & Gudrun

Kurt

Dennis

Christine

Debbie

Steven

Suzanne

Florence

Thomas

David

Robert

Frederick

Dennis & Maxine

David

Virginia

Vandy

Kelley

Samuel

Sara

Pam

Robert

Walter

William

Jeffrey

Gloria

¹ Council of Economic Advisors, Report on the Effects of Conflicted Investment Advice on Retirement Savings (Feb. 2015)
²Id.
³Id. at 11.
⁴Id. at 3, 11.
⁵Id. at 10.
⁶ CFP Board, Letter to DOL Assistant Secretary Gomez re: DOL’s Retirement Security Rule (Jan. 2, 2024), at 4.
⁷Id. at 3.
⁸ Morningstar, Letter to DOL Assistant Secretary Gomez re: DOL’s Retirement Security Rule (Jan. 2, 2024).
⁹ AARP, Letter to DOL Assistant Secretary Liza M. Gomez re: Proposed Retirement Security Rule (Jan. 2, 2024), at 6.
¹⁰Id.
¹¹ CFP Board, Letter to DOL Assistant Secretary Gomez re: DOL’s Retirement Security Rule (Jan. 2, 2024).
¹²Id. at 2, citing Working with Financial Professionals: Opinions of American Investors, Center for Capital Markets Competitiveness (2018) (available at https://www.centerforcapitalmarkets.com/wpcontent/ uploads/2018/04/CCMC_InvestorPolling_v5-1.pdf and AARP Research, “Unbiased Financial Advice about Retirement: Importance to Adults 50+,” (Jan. 2024) (available at https://www.aarp.org/pri/topics/work-finances-retirement/financial-securityretirement/ fiduciary-duty-retirement/)
¹³ Luke Acree, 4 Strategies Financial Advisors Use to Build Trust, NAIFA (December 27, 2021), https://bit.ly/48T2Lu3.
¹⁴Id.
¹⁵ Drew Gurley, Ultimate Guide to Selling Fixed Annuities, Redbird Advisors (January 4, 2022), https://bit.ly/3vq484D.
¹⁶ Insurance Pro Shop, The Best Life Insurance and Annuity Trusted Advisor Success Training Workshop (2023), https://bit.ly/3tzPdEB.
¹⁷ F&G Annuities & Life, Retirement Reconsidered (2023), https://bit.ly/4aGBFbg.
¹⁸ Rona Guymon, Common Misconceptions About Annuities, FA Mag (December 11, 2023), https://bit.ly/3vjYGR2.
¹⁹ Chris Conklin, New Year, New Annuity Options For Your Clients, InsuranceNewsNet (December 26, 2018), https://bit.ly/3S0ITzt.
²⁰ SuccessCE, Selling Annuities: The Key to Unlocking Success (May 10, 2023), https://bit.ly/3RJkIUy.
²¹ Brighthouse Financial, 5 Ways to Help Improve Your Financial Health (November 5, 2019), https://bit.ly/41HogeX.
²² New York Life, Trusted Guidance and Protection: New York Life Insurance, https://bit.ly/3RC2jt3 (last visited December 29, 2023).
²³ New York Life, About New York Life, https://bit.ly/3vdVdDj (last visited December 29, 2023).
²⁴ New York Life, Financial Risks in Retirement, https://bit.ly/3twFUFx (last visited December 29, 2023).
²⁵ New York Life, Find a New York Life Agent, https://bit.ly/3RFQNwD (last visited December 29, 2023).
²⁶See Micah Hauptman & Barbara Roper, Consumer Federation of America, Financial Advisor or Investment Salesperson? Brokers and Insurers Want to Have it Both Ways at 13 (January 18, 2017), https://bit.ly/2jKUbFD.
²⁷Id.
²⁸Id.
²⁹ AARP, Letter to DOL Assistant Secretary Liza M. Gomez re: Proposed Retirement Security Rule (Jan. 2, 2024), at 7.
³⁰Id. at 8.
³¹ Better Markets, Comment Letter Submitted Re: DOL Retirement Security Rule (Jan. 2, 2023), at 4.
³²See International Financial Law Review survey (October 2017).
³³See Mark Egan, Shan Ge, Johnny Tang, Conflicting Interests and the Effect of Fiduciary Duty: Evidence from Variable Annuities, The Review of Financial Studies, Volume 35, Issue 12, December 2022, Pages 5334–5386.
³⁴See U.S. Securities & Exchange Commission, Regulation Best Interest: The Broker-Dealer Standard of Conduct at 33344 (“The Commission does not believe that workplace retirement plans or their representatives and service providers generally fall within the definition of retail customer for purposes of Regulation Best Interest because the workplace retirement plan is not a natural person, and therefore the workplace retirement plan representatives are not a non-professional representative of a natural person that is receiving a recommendation directly from a broker-dealer for ‘personal, family, or household purposes.’”).