The Public Investors Advocate Bar Association (PIABA) submitted a comment letter strongly urging the Financial Industry Regulatory Authority (FINRA) to reject the majority of the recommendations made in FINRA Regulatory Notice 26-06. PIABA raised concerns over several major issues, including proposals that would reduce investor access to justice, expand pre-hearing dismissals, and significantly limit the arbitrator pool.
Michael Bixby, President of PIABA and managing attorney for Bixby Law PLLC, said: “We urge FINRA to reject the bulk of the recommendations made in FINRA Regulatory Notice 26-06. These recommendations would betray FINRA’s investor protection mission and allow the securities industry to escape accountability for damage caused by bad actors and industry members.”
Joseph Wojciechowski, Executive Vice President/Incoming President of PIABA and managing partner at Stoltmann Law, said: “The recommendations in Regulatory Notice 26-06 are a threat to investor rights and the fairness of FINRA’s arbitration forum, and they would erase a generation of investor protection progress made by the securities industry, FINRA, PIABA, and other stakeholders. This Notice also follows the recent trend with FINRA’s general regulatory notices, which have became convoluted, lengthy, unwieldy and ambiguous.”
According to PIABA’s 115-page letter, “Over the last year, PIABA has grown increasingly concerned with the direction of FINRA Dispute Resolution. Recent developments suggest a shift away from investor-protection principles that should guide FINRA’s actions. …
“Regulatory Notice 26-06 sadly reflects many of these same themes. Although framed as modernization, the Notice raises the prospect of increased procedural complexity combined with reduced investor protections. The breadth and structure of the notice, spanning dozens of multipart questions, also place a disproportionate burden on individual investors and their representatives, while institutional participants are far better positioned to respond comprehensively.
“Taken together, these changes suggest a broader trajectory that warrants careful scrutiny.FINRA’s arbitration forum exists to provide a fair and accessible means of redress within a mandatory system. Any reforms should strengthen that function, not weaken it. Maintaining investor confidence in the forum requires adherence to that principle.
“In summary, PIABA opposes proposals that would reduce investor access to FINRA arbitration, expand pre-hearing dismissal practice, professionalize the arbitrator pool at the expense of representativeness, or otherwise increase industry leverage in a mandatory forum. PIABA supports reforms that improve investor protections, procedural training, discovery enforcement, technology, transparency, and the payment of awards.”
Since its formation in 1990, PIABA has promoted the interests of the public investor in all securities and commodities arbitration forums, while also advocating for public education regarding investment fraud and industry misconduct. The members of PIABA have collectively represented hundreds of thousands of investors.
Most recently, PIABA testified before the House Financial Services Committee that FINRA’s actions contradict its mission to protect investors; called on FINRA to reject self-serving arbitration reform recommendations from the industry trade group SIFMA; criticized FINRA for ignoring the multimillion-dollar unpaid arbitration award crisis; and pushed FINRA to end its incorrect application of Rule 12407(a).
