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FINRA Opens Arbitration and Mediation Forums to Customers of Non-Member Investment Advisers

The Financial Industry Regulatory Authority (“FINRA”) has announced that its arbitration and mediation services are now available to customers of non-FINRA member investment advisers (“IAs”). Previously, only disputes with FINRA members were permitted to be arbitrated or mediated before FINRA.

Because FINRA is not a self-regulatory organization for IAs, it cannot compel IAs to arbitrate in its forum. Therefore, any IA proceeding before FINRA is voluntary and cannot be arbitrated unless the following criteria are met:

  • Submission of a post-dispute arbitration agreement by the customer and IA;
  • Agreement by the IA or another party to pay the arbitration surcharge fees (fees assessed against FINRA members in traditional FINRA cases);
  • Written agreement signed by all parties to the arbitration agreeing to submit the dispute to FINRA and acknowledging the following:
  1. Prevailing parties must enforce awards entered against IAs in court as FINRA has no enforcement authority over non-member IAs;
  2. If an IA fails to pay an award, settlement, or FINRA fees, FINRA may bar the IA from the forum in future cases;
  3. Disputes will be processed in accordance with the FINRA Code of Arbitration Procedure; and,
  4. The final award will be publicly available.
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