{"id":5243,"date":"2012-01-17T00:00:00","date_gmt":"2012-01-17T06:00:00","guid":{"rendered":"https:\/\/institutionalinvestorsecuritiesblog.blawgcloud.com\/2012\/01\/sifma_wants_finra_to_take_toug"},"modified":"2022-04-06T10:51:37","modified_gmt":"2022-04-06T15:51:37","slug":"sifma-wants-finra-to-take-toug","status":"publish","type":"post","link":"https:\/\/www.investorlawyers.com\/blog\/sifma-wants-finra-to-take-toug\/","title":{"rendered":"SIFMA Wants FINRA to Take Tougher Actions Against Brokers that Don\u2019t Repay Promissory Notes"},"content":{"rendered":"

The Securities Industry and Financial Markets Association wants the Financial Industry Regulatory Authority Inc. to prevent brokers from being able to plead poverty to escape arbitration payment orders. The promissory notes provide money for retention and recruiting incentives, and as long as a broker agrees to stay with a financial firm for an agreed up on time, they are structured as forgivable notes.<\/p>\n

Many brokers obtained such deals following the economic crisis. Since then, financial firms have gotten more active about submitting arbitration claims to get brokers to pay them back. In 2011 alone, 778 promissory note cases were filed. 1,152 such cases were filed the year before. In most cases, it is the financial firm that ends up winning. <\/p>\n

When a broker won\u2019t pay an arbitration award, FINRA files an action against him\/her that could lead to suspension. However, if the broker demonstrates that he\/she can\u2019t pay it, then suspension may be avoided.<\/p>\n

Many SIFMA members believe that FINRA should take more aggressive measures to get brokers to pay up. The trade group wants the SRO to prevent brokers from being able to claim that they cannot pay when slapped with a case from an industry claimant.
\nSuch a move would likely mean that if a broker were unable to repay a promissory note, he\/she would likely be suspended or have to file for bankruptcy. SIFMA also wants enhanced disclosure of awards that brokers don\u2019t pay, because it believes that the consequence of having this failure made public is incentive for the broker to make good on the matter.<\/p>\n

In a letter to FINRA that it sent last November, SIFMA voiced members\u2019 concerns that the inability-to-pay defense was being abused and that not only was this resulting in compliance and regulatory risks, but also it was creating an unnecessary risk to investors. SIFMA claimed that FINRA Rule 9554 discriminates against industry claimants, who aren\u2019t given the same protections as customer claimants, who don\u2019t have to contend with the inability-to-pay defense from a broker. The trade organization noted that the Securities and Exchange Commission obligates FINRA to take appropriate disciplinary action against defendants that use this defense in bad faith. <\/p>\n

SIFMA, Finra clash over deadbeat brokers<\/a>, Investment News, January 15, 2012<\/p>\n

FINRA Rules<\/p>\n

Securities Industry and Financial Markets Association <\/a><\/p>\n

\nMore Blog Posts:<\/strong>
\nSIFMA Offers Up Best Practices for How Financial Firms Can Interact with Expert Networks<\/a>, Institutional Investor Securities Blog, October 16, 2011<\/p>\n

SEC and SIFMA Divided Over Whether Merrill Lynch Can Be Held Liable for Alleged ARS Market Manipulation, Institutional Investor Securities Blog, July 29, 2011<\/p>\n

Micah S. Green, Expected New CEO of Largest Securities Industry Group, Resigns During Scandal<\/a>, Stockbroker Fraud Blog, May 18, 2007<\/p>\n

Continue Reading \u203a<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

The Securities Industry and Financial Markets Association wants the Financial Industry Regulatory Authority Inc. to prevent brokers from being able to plead poverty to escape arbitration payment orders. The promissory notes provide money for retention and recruiting incentives, and as long as a broker agrees to stay with a financial firm for an agreed up […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[3783,3739,4013],"tags":[],"class_list":["post-5243","post","type-post","status-publish","format-standard","hentry","category-broker-misconduct","category-finra","category-securities-industry-and-financ"],"yoast_head":"\nSIFMA Wants FINRA to Take Tougher Actions Against Brokers that Don\u2019t Repay Promissory Notes — Investor Lawyers Blog — January 17, 2012<\/title>\n<meta name=\"description\" content=\"The Securities Industry and Financial Markets Association wants the Financial Industry Regulatory Authority Inc. to prevent brokers from being able to — January 17, 2012\" \/>\n<meta name=\"robots\" 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