What Happens when FINRA Arbitration Awards Go Unpaid?

Investors trust their financial professionals to help them make sound decisions with their money. Unfortunately, however, financial professionals sometimes take advantage of this trust, defrauding their clients out of large sums of money. Luckily, the Financial Industry Regulatory Authority (“FINRA”) provides a way for investors to recoup their money. When an investor signs a contract with a broker-dealer, he or she ordinarily agrees to settle disagreements via FINRA arbitration. Arbitration keeps disputes between financial professionals and investors out of court while providing investors with an opportunity to hold dishonest brokers and investment advisors accountable for their actions. 

Unpaid FINRA Arbitration Awards 

Usually, financial professionals pay investors when ordered to do so by a FINRA arbitration panel. However, this isn’t always the case. For example, there are instances in which financial professionals declare bankruptcy following arbitration. When this happens, an investor who is owed a FINRA arbitration award is simply added to the list of the financial professional’s creditors. Such investors may or may not ever see a dime of what they’re owed. 

The Statistics On Unpaid FINRA Arbitration Awards

Although most financial professionals pay investors when required to do so by a FINRA arbitration panel, a significant percentage of all FINRA arbitration awards go unpaid. In fact, it has been estimated that approximately 25% of all FINRA arbitration awards are never received by investors whose cases are successful. For example, in 2019 alone, FINRA arbitration panels awarded approximately $96 million to investors. Of that amount, roughly $19 million remains unpaid. Thus, approximately 20% of all FINRA arbitration awards went unpaid in 2019. 

Dealing With Unpaid FINRA Arbitration Awards

FINRA is aware of the failure of some financial professionals to pay arbitration awards, and it has taken steps to address this issue. And although rules exist that penalize financial professionals for failing to pay arbitration awards, FINRA continues to seek ways to ensure that investors receive what they are owed, including proposing rules that would prevent financial professionals from transferring assets to avoid paying arbitration awards. Despite FINRA’s attempts to address this issue, investors continue to go unpaid following arbitration. Therefore, it is recommended that investors dealing with this issue seek legal assistance as soon as possible. 

Fort Lauderdale Investor Representation Attorney

Investment professionals are expected to do what is best for their clients. When they fail to do so, they should be held accountable for their actions. At Simms Law, P.A., we represent investors who have been victimized by financial professionals. Our experienced investor representation attorneys take our clients’ concerns seriously and are aware of what is at stake when an investor suffers losses due to the actions of a financial professional. If the unethical actions of a financial advisor or broker have led you to suffer financial losses, please contact us today for a free consultation.