Latest Study: 1 in 4 Brokers Don’t Pay Claimants in FINRA Securities Arbitration matters. Investors left with no recourse and stuck in Scofflaw Hell.
If you habitually don’t pay parking tickets, the odds are you will find your name standing out in the local newspaper where you are listed as a scofflaw. If you are a broker-dealer who fails to honor an arbitration award made by a FINRA panel of arbitrators, you would be one of many that have seemingly ‘ripped up the ticket’ and walked away.
Those arbitration awards are apparently not worth the paper they are written on FINRA letterhead if you are one in four investors who has miraculously prevailed in an action against a broker-dealer that was adjudicated by the so-called “independent arbitrators” appointed by FINRA (7% of investors prevail, and in 93% of cases, the brokerage prevails)
(BankInvestmentConsultant.com)-Willie Cabbil worked for General Motors for 30 years, at one point as a janitor, only to lose his $340,000 retirement savings in 2011 to former Resource Horizons Group broker, Robert Gist.
FINRA arbitrators found that Gist ran his advisory practice like a Ponzi scheme and used the retirement of the 62-year-old retiree from Alabaster, Ala., to pay other clients’ returns on a non-existent investment.
They awarded Cabbil $300,000.
“I was ecstatic to have finally got my life back,” he says.
However, Cabbil saw none of that money. FINRA later shut down Murrietta, Ga.-based Resource Horizons over its inability to pay millions in client claims, and Cabbil was one of many of Gist’s former clients who never regained a penny.
A former Resource Horizons officer who supervised Gist now works at Kovack Securities in Murrietta, along with other former Resource employees. Cabbil says stress related to the loss of his savings has caused health problems that prevent his return to work.
Cases like Cabbil’s are far from unique.
1 IN 4 DOLLARS UNPAID
A study released today finds that one in three awards granted to investors in FINRA arbitration disputes went unpaid in 2013. That amounts to one in four dollars that aggrieved investors never see from their awards, according to the Public Investors Arbitration Association, which conducted the study.
“FINRA, like the NASD before it, has remained quiet regarding the issue of unpaid awards,” Hugh Berkson, the author of the study, writes. That’s because “the unpaid award statistics do not paint a favorable picture of the industry.”
PIABA researchers began with a single FINRA-released statistic: that $62 million in awards went unpaid in 2013. Then they added up all the cases the regulator published on its website, and found that 225 decided in favor of investors. Of those, 75 went unpaid.
FINRA did not make Chairman Richard Ketchum or Richard Berry, its director of dispute resolution, available for interviews.
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