Former NFL player Bruce Wilkerson, now in his fifties, tells a story that is becoming all-too-familiar when it comes to the FINRA securities arbitration forum. Having been defrauded by his financial advisor out of more than $600,000 in retirement savings, Wilkerson won his money back as part of an enormous $5.4 million settlement which involved the lost investment money of dozens of investors.
Winning in Arbitration Does Not Equal Getting Your Money Back
Yet, if things stay as they are, Wilkerson will not see a penny of his settlement. That is because the financial advisor is broke and will likely go to prison, and his broker-dealer will not pay for his transgressions.
According to PIABA, an association of securities lawyers who advocate for public investors, this situation is all too common and must be fixed at the highest level - by the government and regulators themselves. Brokers and broker-dealers simply cannot be relied upon to have adequate funds and insurance to pay for the offenses of their "bad apples."
Task Force Indicates $200M In Awards Unpaid
Recently, FINRA created a task force to study the problem and discovered that, in the five years from 2012 through 2016, a total of 268 awards (27% of the cases where investors were successful) or $199 million in awards (29% of total damages awarded to investors) have gone unpaid, the report states.
PIABA has added that, having studied data from 2017: 36% of the investors who won their cases collected nothing, and 28 cents of each dollar awarded have gone unpaid.
With the deck stacked against them to such a large extent, it's a good thing investors can take their case in front of a jury of their peers, right?
Wrong. Nearly all of the broker-dealers in the financial industry servicing retail investors require investors to sign a binding arbitration agreement which forces aggrieved investors into the arbitration forum that too often lets them down, even when they beat the odds and win.
FINRA Needs to Create a Pool to Pay Damages to Investors
What should be done?
PIABA and others have lobbied for years for the financial industry to create a "pool" of funds from which unpaid settlements might be drawn to pay victorious victims. It's a grand idea, and one backed by Sen. Elizabeth Warren, who is trying to get the pool passed into law. So far she has met resistance from the industry; but with more stories like Bruce Wilkerson's making their way into the public eye, it's unlikely to stay that way for long.