By George H. Friedman, SAA Editor-in-Chief
FINRA on November 5 filed with the SEC a long-awaited rule amendment that would give investors greater rights when arbitrating with inactive industry parties. Next up is publication in the Federal Register, and the opening of a public comments period.
FINRA in October 2017 issued Regulatory Notice 17-33, Amendments to the Code of Arbitration Procedure for Customer Disputes to Expand the Options Available to Customers if a Firm or Associated Person is or Becomes Inactive. The Reg Notice followed action by FINRA’s Board in May 2017 and, as the name implies, was aimed at expanding the customer’s options when an industry party becomes inactive before or during a case. Less than ten comments were received by the December 2017 due date.
Rule Change Proposal Filed with SEC
Just as we went to press, we learned that the proposed rule, SR-FINRA-2019-027, was filed with the SEC on November 5. The thrust? Says the rule filing: “FINRA is proposing to amend the Code of Arbitration Procedure for Customer Disputes (Code) to expand a customer’s options to withdraw an arbitration claim if a firm or an associated person becomes inactive before a claim is filed or during a pending arbitration. In addition, the proposed amendments would allow customers to amend pleadings, postpone hearings and receive a refund of filing fees under these situations.” We will do a more thorough review of the text in a future Alert after the rule is published in the Federal Register and the due date for comments is set, but we thought we would share this news with our readers now.
(ed: *Wonder what took so long? It’s taken nearly two years from the close of the comment period. **In keeping with the “new normal,” FINRA solicited public comments via a Regulatory Notice. The rule filing addresses the comments. ***This is the latest of several steps FINRA has taken to address unpaid awards. For example, the Authority now publishes detailed statistics on the subject. ****The filing had not yet been posted on the SEC Website as we went to publication.)