ASA Urges FINRA to Overhaul Arbitration System, End Regulatory Capture By Plaintiff Lawyers

WASHINGTON – The American Securities Association (ASA) today submitted a comment letter to the Financial Industry Regulatory Authority (FINRA) in response to Regulatory Notice 26-06, calling on FINRA to adopt a sweeping package of reforms to modernize its arbitration rules. ASA is specifically pressing FINRA to implement wholesale structural reform including meaningful appeals rights, industry-experienced arbitrators, enforceable dismissal standards, and a fee structure that does not subsidize meritless claims.

"FINRA's arbitration system should be a neutral venue that serves investors and industry participants alike," said ASA President and CEO Chris Iacovella. "Instead, it has been shaped by a politically connected special interest group whose members are paid exclusively to prosecute claims against the firms that fund FINRA's operations. That’s not investor protection, it's regulatory capture, and the reforms FINRA proposes must confront it directly."

In the letter, ASA proposed over a dozen reforms that will restore confidence and fairness to FINRA's arbitration system, including: 

• Allow an opt-out of FINRA's arbitration above specific dollar thresholds;

• Create a meaningful right to appeal;

• Require punitive damages to be consistent with applicable law;

• Reform the motion to dismiss standard; and

• Improve arbitrator qualifications and industry knowledge.
  

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The American Securities Association (ASA) represents the retail and institutional capital markets interests of regional financial services firms who provide Main Street businesses with access to capital and advise hardworking Americans how to create and preserve wealth. ASA’s mission is to promote trust and confidence among investors, facilitate capital formation, and support efficient and competitively balanced capital markets. This mission advances financial independence, stimulates job creation, and increases prosperity. The ASA has a geographically diverse membership of almost one hundred members that spans the Heartland, Southwest, Southeast, Atlantic, and Pacific Northwest regions of the United States.