Hugh Berkson, working with co-author David Meyer, has written and published his third report concerning unpaid arbitration awards, titled: FINRA Arbitration’s Persistent Unpaid Award Problem.
Hugh’s report reveals that the problem with unpaid arbitration awards, about which he first wrote in February 2016, has not improved in the least. Claimants who brought arbitration claims against their brokers in 2020, and won, saw nearly 30% of the awards go unpaid, with $.24 of every $1 unpaid. The Report details the history of the problem, FINRA’s lackluster response to the repeated calls for a substantive remedy, and outlines the best-proposed solution: a national investor recovery pool (the “Pool”). Hugh’s suggestion is that investors who have won their arbitration claims be entitled to make a claim against the Pool once the award is final and the firm or broker has refused or failed to pay the award. What, then, is the cost of such a remedy?
The cost of the suggested Pool is exceedingly modest: to fund it for 2022, Hugh calculated it would cost $6,350.11 per firm, $107.26 per registered representative (broker), or $.14 per investor. It is eminently reasonable to ask the industry itself to fund the Pool given that brokerage firms, through the course of the pandemic, saw profits hold steady or even increase to record levels.
A full copy of the report can be found here.
PiABA’s press release/summary of Hugh’s new report can be found here.
There was, before the Report was released, significant interest from the press concerning the topic. We’ll update this blog entry as Hugh is quoted in the media regarding the Report and his continued demand for the creation of a national investor recovery pool.
Hugh Berkson is a Securities Attorney with McCarthy, Lebit, Crystal & Liffman, Co. LPA. Hugh is rated AV® Preeminent™ by Martindale-Hubbell®.
He obtained a business degree in Finance from the University of Texas at Austin in 1989, and is a 1994 graduate of Case Western Reserve University School of Law, where he was a member of the Order of the Barristers and received both the American Jurisprudence Award, (National Mock Trial) in 1993 and the Jonathan M. Ault Mock Trial Prize for 1993-1994.
