February 8, 2018 / 4:01 PM / 3 months ago

U.S. financial watchdog says most wronged investors receive cash awards

NEW YORK, Feb 8 (Reuters) - The majority of brokers and firms who violated rules paid disgruntled clients the cash that arbitrators awarded them, the Financial Industry Regulatory Authority said Thursday, calculating that fewer than 2 percent failed to pay the awards in 2016.

The securities industry self-regulator published the data for the first time in an effort to tamp down growing concern from investor advocates that clients who lose money because of a broker who made overly risky investments, for example, may never get paid back if the broker and brokerage have financial difficulties.

Securities lawyers and academics have pointed to examples where investors have battled to recover lost money from a firm that faces many different customer complaints. A Reuters report published last summer named nearly 50 firms that employ a high number of brokers who have customer complaints or other red marks on their records.

FINRA oversees the roughly 3,700 securities brokerages in the United States. The complaints it receives from customers are heard by arbitration panels, often comprised of industry people and securities lawyers.

In 2016, FINRA arbitration panels heard 2,457 cases. Most years, two-thirds are settled outside of arbitration, and the parties agree not to disclose any details including the settlement amount.

Of the nearly 2,500 cases, FINRA arbitration panels awarded clients money in 389 cases. In 44 of those cases the investors said they never received the full payment from the firm, according to FINRA.

FINRA published the information as part of a broad effort to evaluate and improve its legacy systems. The group, which was formally established in 2007, is an outgrowth of the National Association of Securities Dealers, which formed in 1939. (Reporting By Elizabeth Dilts; Editing by David Gregorio)

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