A quote from the FINRA 2010 Annual Report states, “FINRA maintains as its top priority to protect investors …” A number of facts belie this statement and should alert investors to the cruel reality that FINRA is far more dedicated to protecting the interests of its members than the interests of public investors. The message to investors as it relates to FINRA is simple. Do not take seriously FINRA ‘s claim to “protect investors.” FINRA is a trade association funded primarily by the contributions of its members which are broker dealers from the largest Wall Street firms to the smallest one man shops.
Most people are unaware that FINRA was previously known as the National Association of Securities Dealers (NASD), which told the world that the organization was a trade association. Financial Industry Regulatory Authority sounds like a governmental regulatory body. However, it is, in fact, the same trade association operating under a high sounding, protective moniker.
Investors’ only option to formally pursue claims against broker dealers, in most situations, is the FINRA Dispute Resolution forum. William Francis Galvin, Secretary of the Commonwealth Of Massachusetts told a US House Subcommittee on Capital Markets:
“The term ‘arbitration’ as it is used in these proceeding is a misnomer. Most often, this process is not about two evenly matched parties to a dispute seeking the middle ground.”
FINRA Dispute Resolution arbitration results demonstrate discouraging win rates for investor claimants. Less than 40% of claims taken to hearings in recent years have resulted in any recovery for claimants. Many “winning” claims have resulted in awards which represent a minuscule percentage of damages being sought.
The clear warning to investors is to take every possible action to protect yourself and avoid the need to file an arbitration claim before the FINRA Dispute Resolution forum.
To learn more about Dale Ledbetter, visit his website at www.dlsecuritieslaw.com.