Investor plaintiffs’ attorneys want the brokerage industry to fund a restitution pool to make good on unpaid arbitration awards.
That was the main recommendation in a report released Thursday by the Public Investors Arbitration Bar Association, which claimed that one in every three arbitration awards made in 2013 went unpaid, amounting to almost a quarter of total damages awarded.
The plaintiffs’ lawyers group said a Finra-administered “national recovery pool” could be created by the SEC or Finra through rule-making.
PIABA said a fee of just under $100 per registered rep would cover the $62.1 million that went unpaid from 2013.
“Finra itself is more than capable of funding the pool,” the report added, pointing out that Finra has paid rebates to member firms and has a $1.5 billion investment fund.
Funding the pool from investor fees would cost about 50 cents per customer, said the association.
“The cost is miniscule compared to the cost of protecting investors,” said PIABA president Hugh Berkson on a call with reporters Thursday.
Of course, with more money to pay awards, plaintiffs’ lawyers stand to get paid more as well.
But PIABA officials said many investors are denied justice because lawyers won’t bring cases if they know they won’t collect.
Requiring errors and omissions insurance won’t fix the problem because there are too many exclusions and limits on the coverage, the association said.