Widening FINRA’s Reach?

The Securities and Exchange Commission recently issued an interesting report that may portend a broader reach for FINRA to resolve disputes. 

 While FINRA members – typically a broker or financial advisor at a broker-dealer – are usually required to arbitrate customer disputes, independent advisors are not.  The SEC found that 40% of these independent advisors don’t even have arbitration agreements in place with their customers.  Those that do typically default to the AAA or JAMS.  These organizations tend to be less suited for these types of disputes (their strengths lie elsewhere) and more costly. 

This raises the question of “If not AAA or JAMS, then who?”  As advocated by the Public Investors Advocate Bar Association, the logical answer is FINRA.  Specifically geared to address securities-related disputes, FINRA represents a solution that benefits both the advisor and the investor.