NASAA targets deadbeat brokers

The state and provincial regulators that make up the North American Securities Administrators Association (NASAA) approved a model rule that would make it a violation for brokerage firms to ignore arbitration awards, judgments to aggrieved clients, and regulatory sanctions.

NASAA’s membership adopted a model rule that aims to address the problem of firms failing to pay monetary awards to investors, or penalties imposed by regulators.

The model rule, which is now available for regulators to consider adopting in their local jurisdictions, creates a basis for further enforcement action against a firm that fails to pay client awards or monetary sanctions.

The rule would make it a “dishonest or unethical practice” for a registered firm to fail to pay “any investment-related, customer-initiated arbitration award or judgment,” along with any fine, civil penalty, restitution or disgorgement order, imposed by a state or federal regulator.

“Broker-dealers and investment advisers should promptly pay any arbitration awards or regulator-imposed fines and if they do not, this model rule provides state regulators with another means to take action against them,” said NASAA president, Melanie Senter Lubin, Maryland’s division of securities commissioner, in a release.

“This rule is another tool to help states assist in efforts to ensure victims get the compensation they deserve,” added Brett Olin, vice-chair of NASAA’s broker-dealer section committee and chief of enforcement at the Nevada securities division.

Under the rule, firms could avoid further sanctions by agreeing to, and living up to, payment arrangements.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.