How Does FINRA Ensure That An Award or Settlement Is Paid?

If you are an investor considering bringing a securities fraud claim against your broker dealer, you may be wondering how FINRA ensures that the brokerage firm pays an award or settlement if you are able to prevail at arbitration or negotiate a settlement of your claim.

FINRA Rule 9554 addresses what happens if an industry member fails to comply with an arbitration award or related settlement. Specifically, FINRA Rule 9554(a) provides provides that if a member of FINRA (typically a broker-dealer or brokerage firm), or person associated with a member (typically a financial advisor) fails to comply with an arbitration award or a settlement agreement related to an arbitration or mediation under Article VI, Section 3 of the FINRA By-Laws, FINRA staff may provide written notice to such member or person stating that the failure to comply with 21 days of service of the notice will result in a suspension or cancellation of membership or a suspension or bar from associating with any member.

Accordingly, if a brokerage firm or financial advisor fails to pay an award (or breaches a settlement agreement), you simply notify FINRA of the failure or breach and then FINRA sends out notification to the brokerage firm or financial advisor of its intent to suspend that person or entitle for failure to comply with such award or settlement agreement. If, after being notified of the breach by FINRA, that brokerage firm or financial advisor fails to then pay the award or cure its default of the settlement agreement, the brokerage firm or financial advisor will have their registration with FINRA suspended. Such a suspension precludes the brokerage firm or financial advisor from conducting business in the securities industry and is a serious deterrent to any firm or broker from failing to comply with an award or settlement agreement.

If you have any questions about the trading in your securities account or believe that you are the victim of securities fraud, The White Law Group can help. To speak to a securities attorney, please call our Chicago Office at 312-238-9650 for a free consultation.

The White Law Group, LLC is a national securities fraud, securities arbitration, investors protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Boca Raton, Florida.

To learn more about The White Law Group, visit https://whitesecuritieslaw.com.