In the modern world, the overwhelming majority of registered financial advisors make their clients sign customer agreements. Within these agreements, you will likely find a mandatory arbitration provision. In the event that you have a claim against your advisor or your brokerage firm, you will likely be required to resolve the dispute through the FINRA arbitration process.
In some cases, your complaint will be settled at some point during the process. However, if you go through the arbitration process, and your claim is successful, you can be issued a FINRA arbitration award. Essentially, your FINRA arbitration award is a financial judgement in your favor.
Brokers and brokerage firms have professional obligation to pay full compensation for all FINRA arbitration judgements, without any unreasonable or unwarranted delay. FINRA Rule 9554 is the key enforcement mechanism that FINRA staff members have to ensure that brokers and brokerage firms comply with the terms of arbitration awards.
How Does FINRA Rule 9554 Work?
Under FINRA’s securities industry regulations, arbitration awards must be paid within 30 days of the date that the award was granted. If a broker or brokerage firm fails to comply with this requirement, then industry regulators can use FINRA Rule 9554 to take immediate enforcement action against them.
FINRA Rule 9554 allows for expedited suspension or cancellation of membership of any party that fails to comply with a FINRA arbitration award. Specifically, regulators are empowered to send the violating party a 21-day written notice that their securities industry membership will be revoked if they do not rectify the problem.
What Defenses Do Brokers Have Against a FINRA Rule 9554 Action?
Registered investment advisors (RIAs) and registered brokerage firms have four defenses available that can be used if they are facing an expedited suspension under FINRA Rule 9554:
- They can prove that the arbitration award has actually already been paid in full;
- They can prove that they have reached a voluntary settlement on payment terms with the complaining customer;
- The can prove that they have taken further legal action, filing a claim to vacate or modify the award and that their motion to do so is still pending in the court; or
- They can prove that they have filed for bankruptcy or that this debt has already been discharged in bankruptcy.
Those are the only available legal defenses. In a customer dispute, a broker or brokerage firm cannot argue that they currently lack the “bona fide ability to pay”. While that defense is still available in some non-customer securities industry disputes, it cannot be used in disputes involving the firm’s current or former investors.
Contact Our Office Today
At Sonn Law Group, our top-rated FINRA arbitration lawyers have helped many investment fraud victims obtain full and fair compensation for their losses. Our legal practice is dedicated to advocating for the rights of investors. If you lost a significant amount of money because of the misconduct of your broker, we are here to help. Please contact us today to request your free legal consultation.