The Public Investors Advocate Bar Association (PIABA) offered measured praise for the SEC Investor Advisory Committee for its new recommendations related to Registered Investment Advisers (RIAs) arbitration. PIABA, a long-time critic of forced arbitration, welcomed the move as an important first step, but emphasized that the SEC has a lot more work to do to protect main street investors.
“PIABA joins with the financial industry in calling for more fairness and consistency,” said Adam Gana president of PIABA and managing partner of Gana Weinstein LLP. “Mandatory arbitration, as it stands today, often locks investors out of meaningful justice. A fair and efficient arbitration process truly benefits all sides. We hope the SEC continues to study RIA arbitration and takes the appropriate steps to create a system that is fair, equitable and does not price investors out of justice.”
The Investor Advisory Committee approved the following recommendations related to the use of arbitration clauses by SEC-registered investment advisers:
- Ban the worst clauses - Prohibit especially harmful provisions in pre-dispute arbitration agreements and bring RIA clauses in line with investor protections available in FINRA arbitrations;
- Disclosure is key – Require disclosure of arbitration clauses and outcomes consistent with disclosures made by brokerage firms under FINRA Rules;
- Assess the scope of the RIA arbitration problem - Gather and assess data regarding the use of predispute clauses by investment advisers and the outcomes of client-involved arbitrations; and
- Educate Investors – Develop clear, accessible materials to educate investors on the arbitration process.
PIABA has been at the forefront of the investor arbitration reform movement. In December 2024, Gana appeared as an expert panelist before the Investor Advisory Committee and urged the SEC to study and fix the problem. At the time, he called contractual arbitration in the investment advisory space “a disaster.”
In February 2024, a coalition of investor advocacy groups including PIABA, the American Association for Justice (AAJ), Americans for Financial Reform, Better Markets, Consumer Federation of America, the National Association of Consumer Advocates (NACA), and Public Citizen, announced a campaign aimed at reforming SEC rules for registered investor advisers (RIA).
PIABA formed the coalition in the wake of a June 2023 report from the SEC’s Office of the Investor Advocate and the Office of the Ombuds that studied the problematic practice of forced arbitration for aggrieved investors seeking restitution for improper investment practices by their RIA.
“Investors should not be forced into opaque, one-sided forums with no meaningful choice or recourse,” Gana said. “These recommendations are a strong step forward—but the SEC must ensure they translate into real-world change.”
