FINRA Dispute Resolution Opening to RIAs


Linda Fienberg, President of FINRA Dispute Resolution, recently announced that, after numerous requests, FINRA Dispute Resolution is now an alternative dispute resolution forum available to registered investment advisers (RIAs) and their clients. According to Fienberg, this decision will provide them with a forum option that is likely less expensive than filing an arbitration claim outside a self-regulatory agency or initiating litigation in the state or federal courts.

FINRA Dispute Resolution will make a formal announcement of this decision soon. However, a few arbitrations involving RIAs are already in the system. Interestingly, Fienberg noted that this decision was not related to FINRA’s efforts to attain regulatory control over investment advisers.

We do know that participation in FINRA Dispute Resolution will require the agreement of all the parties concerned. However, some questions remain to be answered: Will RIAs attempt to insert a FINRA arbitration clause into client agreements going forward? Is FINRA adequately staffed to handle the potential increase in arbitration filings? Also, will arbitrators be required to have specialized training on the Investment Advisers Act of 1940 to handle matters involving RIAs?

These questions and likely many more may be answered in the coming months. Certainly, before making any decisions customers and RIAs alike will consider the pros and cons of all available dispute resolution forums, such as the length of each process, costs associated with each potential forum, the benefit of jurors versus arbitrators, scope of discovery, right to file dispositive motions, availability of appeal, and more.

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