(Dow Jones) Brokers soon may be less inclined to plead poverty when faced with a demand to pay an arbitration award.

A rule change proposed by the Financial Industry Regulatory Authority (Finra) would eliminate a provision that allows brokers and brokerage companies to use that excuse to keep their securities licenses when they don't make good on arbitration awards.

The change could be good news for some investors who win their arbitration cases but don't receive payment of an award, as it puts more pressure on a broker to at least agree to some kind of arrangement.

Finra requires the payment of arbitration awards within 30 days, and uses an expedited proceeding to suspend those who don't comply. Now, however, a brokerage or broker can cite "inability to pay" as a defense against suspension. Investors' advocates accuse some industry members of abusing that defense.

"I've seen many cases in which a broker doesn't pay an award and is able to remain in the business," says Nicholas Guiliano, a securities arbitration lawyer in Philadelphia.

Finra's rule proposal eliminates the "inability to pay" defense. However, it leaves in place certain others, including a bankruptcy filing. Guiliano says this is also used to avoid paying awards, but is an option some brokers would rather avoid and could create more opportunities for settlement.

Also, investors have recourse in bankruptcy court, which Finra calls a more appropriate venue for judging a "financial condition offense," according to the rule-change filing. Bankruptcy cases are subject to federal perjury charges and can mean greater penalties against industry members who hide assets, the filing notes.

Other defenses include settling for another amount or a payment schedule and challenging an award in court.

The change, if approved, may help only in limited cases, says William Jacobsen, director of the Securities Law Clinic at Cornell Law School. "Unless it's an extremely large award, most brokers would try to scrape together the money," he says. Regulators and lawyers, he says, should also observe a careful balance between putting fear into brokers and continuing to let them earn a living so that they can ultimately pay what they owe.

Jill Gross, director of the Investor Rights Clinic at Pace Law School in New York, says collecting awards isn't as serious a problem as it may have been in the past. "But it will always continue to be a problem for customers duped by boiler rooms and fly-by-night operations," she says.

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