With the migration of financial professionals to the RIA space, the unpaid awards issue has become more complex, Edmiston said. The scope of the problem is “masked” due to many commercial arbitration forums’ lack of transparency and reportable information, he said.
“Investors should be given the right to choose their arbitration forum, and they should be given the right to choose court. After all, RIAs are fiduciaries and should be comfortable letting an investor decide which dispute resolution mechanism, arbitration or court, will be in their best interest,” Edmiston said.
Until that happens, for those RIAs who are mandating arbitration, “they should be subsidizing the costs of the forum selected. Additionally, investors would benefit from some transparency in the arbitration process, and some uniformity of rules. For example, investors are unable to look up prior arbitration awards in many forums other than FINRA,” Edmiston said.
To remedy this, PIABA wants states and the SEC to create a central depository that tracks disciplinary actions, arbitration and unpaid awards for RIAs, as BrokerCheck does for brokers and reps.
“In the coming year, PIABA will continue to work with all stakeholders and to call on the SEC to study the problem, exercise its congressional grant of authority and take steps to eliminate unpaid arbitration awards,” Edmiston said.
The group is also lobbying regulators and lawmakers to require advisors, reps and firms to disclose the existence of any potentially applicable insurance coverage, Edmiston said.