The new rule will be available to NASAA state regulators to consider adopting in their own jurisdictions.
WASHINGTON, D.C. – (May 20, 2022) – The North American Securities Administrators Association (NASAA) announced that its membership has voted to approve a model rule that addresses the failure of regulated firms and persons to pay final awards and judgments to customers as well as the failure to pay fines and other monetary penalties imposed by regulators.
“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. “I greatly appreciate NASAA’s Broker-Dealer Section Committee and its Investment Adviser Section Committee for their leadership in getting this rule approved by our members.”
“This rule is the result of coordinated efforts between several committees and project groups within NASAA and significant engagement from stakeholders in the public comment period. The end result is good for investors,” said Stephen Brey, Chair, of NASAA’s Investment Adviser Regulatory Policy & Review Committee and Administrative Law Specialist, Michigan Corporations, Securities & Commercial Licensing Bureau.
The model rule would make it a dishonest or unethical practice for registrants to fail to pay any investment-related, customer-initiated arbitration award or judgment, fine, civil penalty, order of restitution, order of disgorgement, or similar monetary payment obligation imposed by any state securities regulator, the SEC, or FINRA. Registrants may also avoid licensing actions under the model rule by entering into and staying current with alternative payment arrangements related to obligations covered by the model rule. Ultimately, the model rule would provide an additional basis for enforcement actions related to unpaid awards and could help encourage registrants to satisfy their monetary obligations to customers, clients, and regulators.
“This rule is another tool to help states assist in efforts to ensure victims get the compensation they deserve,” said Brett Olin, Vice-Chair of NASAA’s Broker-Dealer Section Committee and Chief of Enforcement, Nevada Securities Division.
The model rule is now available for NASAA members to consider adopting in their own jurisdictions. You can read the model rule on the NASAA website.
The Unpaid Customer Arbitration Awards Model Rule was issued for a 30-day public comment period in October 2021.
Organized in 1919, the North American Securities Administrators Association (NASAA) is the oldest international organization devoted to investor protection. Its membership includes the securities regulators in the 50 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands; the 13 provinces and territories of Canada; and the country of Mexico.
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