FINRA proposed amendments to its Membership Application Program rules to incentivize the timely payment of arbitration awards. The proposed changes are designed to allow FINRA to "take a stronger approach" in addressing pending arbitration claims, awards and settlement agreements. Comments regarding the proposed rule changes must be submitted by April 9, 2018.
Specifically, the amendments are intended to address circumstances in which (i) a member firm hires an individual with pending arbitration claims where there are concerns about payment, or (ii) a member firm with substantial arbitration claims attempts to avoid payment by moving assets to another firm and closing down. The proposal provides FINRA with, among other things, rule-based authority to presumptively deny new member applications in the event the applicant or its associated persons are "subject to pending arbitration claims." Under the proposal, an applicant could rebut the presumption of denial by demonstrating the ability to satisfy the pending arbitration claims.
FINRA also noted several alternative proposals that were considered, including a presumption of denial for continuing membership applications ("CMAs"). FINRA decided against proposing such a general presumption of denial for CMAs, but is soliciting comments on a presumption of denial in certain situations.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.