FINRA Proposes Rule Changes To Incentivize Payment Of Arbitration Awards

FINRA proposed amendments to its Membership Application Program rules to incentivize the timely payment of arbitration awards. The proposed changes are designed to allow FINRA to "take a stronger approach" in addressing pending arbitration claims, awards and settlement agreements. Comments regarding the proposed rule changes must be submitted by April 9, 2018.

Specifically, the amendments are intended to address circumstances in which (i) a member firm hires an individual with pending arbitration claims where there are concerns about payment, or (ii) a member firm with substantial arbitration claims attempts to avoid payment by moving assets to another firm and closing down. The proposal provides FINRA with, among other things, rule-based authority to presumptively deny new member applications in the event the applicant or its associated persons are "subject to pending arbitration claims." Under the proposal, an applicant could rebut the presumption of denial by