Member firms, have you reviewed your pre-dispute arbitration agreements lately? While arbitration agreements are certainly not required, member firms have almost universally adopted them since arbitration became a preferred method of dispute resolution in the 1980s. In April of this year, FINRA issued Regulatory Notice 21-16 to highlight some key areas where firms could be subject to disciplinary action for failing to preserve customer rights under FINRA rules. Below are the topics FINRA identified as areas of concern in customer agreements. While not an exhaustive list of possible violations, this quick reference chart should assist firms in identifying the types of issues that are currently on FINRA’s regulatory radar.
While arbitration is generally still the preferred method of dispute resolution (well – perhaps depending on who you talk to!), and member firms are free to utilize pre-dispute agreements that require arbitration, member firms must be careful in drafting these agreements so as not to overreach and run afoul of FINRA rules. It is advisable and a best practice, based on FINRA’s recent guidance, for firms to review their agreements to ensure proper compliance.