Advisors May Come Under Greater Risk With New FINRA Award Levels

Friday, March 09, 2012 10:54
Advisors May Come Under Greater Risk With New FINRA Award Levels

FINRA aims to raise arbitration awards, making it more impactful for advisors to be found at fault. The increase in awards is still in the proposal stage and is open for comment until March 20. In a simplified arbitration, there is no hearing unless the client requests it. This will save costs and it will also put advisors at greater risk since they have no forum to defend themselves. Minimal discovery and minimal involvement will make it easier to blame advisors, even in cases of market volatility. It may make it easier for clients to bring complaints since there will be no contact with the advisor.  
There is still time to weigh in on this issue. The changes could practically double the number of cases brought against advisors, rightly or wrongly. Based on the number and nature of comments received, amendments may be proposed which will lengthen the period for comment. There has been no date set for approval so there is still time to influence this decision.

This Website Is For Financial Professionals Only

Comments (3)

Hi Lisa - I know this could be seen as semantics, but in light of your other post on definitions, advisors are not subject to FINRA arbitration, registered reps are.

Advisors - series 65,66
Registered Reps 6,7,etc

brentb843 , March 09, 2012
Hi Lisa, I read your post and immediately knew you were talking about the many "registered reps" who call themselves advisors--at least in casual conversation. I wanted to take the time out of my busy schedule to let you know. This makes me feel important.
ericm205 , March 09, 2012
Excellent point about the difference in advisors and registered reps. Thanks for making it. Terms have become so muddled in light of the fiduciary conversation...stay tuned because another post about this very topic is in the offing.

Regarding the second comment, yes, you picked up on the point beautifully. Thanks for taking the time to make the post.
lisagray , March 11, 2012

Write comment

You must be logged in to post a comment. Please register if you do not have an account yet.