Why Do So Few RIAs Accept Finra's Invitation To Administer Arbitrations With Clients? It Might Not Be Just Because They Don't Like Finra

Wednesday, May 29, 2013 14:53
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Why Do So Few RIAs Accept Finra's Invitation To Administer Arbitrations With Clients? It Might Not Be Just Because They Don't Like Finra

Tags: compliance | FINRA | RIAs

Finra, the brokerage industry regulatory body, opened its arbitration system up for RIAs to use in October 2012, but few RIAs have taken Finra up on its offer, even though it would cost less than conducting the arbitration through the American Arbitration Association.

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"Finra's arbitration fees are considerably lower than those of the AAA and others, and there was speculation that would attract investment advisers," reports The Wall Street Journal. However, RIAs have so far given Finra a cool reception.

 

WSJ quotes an AAA spokesperson saying it conducts several hundred client-RIA arbitrations annually, but just four RIAs have used Finra's abritration facilities since they were opened to RIAs in October.

 

Why are so few investment advisors using Finra's arbitration system when filing a claim through the AAA typically costs much more? While you may think it is because RIAs hate the notion of being regulated by the compliance organ established and dominated by Wall Street, the WSJ report says there may be another explanation.

 

A compliance attorney quoted in the WSJ article said he believes RIAs use the higher expenses of forums other than Finra "to economically intimidate customers." The filing fee in the AAA could be as much as five times the fee in Finra's forum, he noted.  

 

 

 

 

 

 

 

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