Corporate & Securities Law

Effective July 2nd, 2010, firms and associated persons will be unable to rely on an inability-to-pay defense in expedited actions for failure to comply with arbitration awards involving customers if the FINRA Rule 9554 notice initiating the action is sent on or after July 2, 2010.

The new rule, recently approved by the SEC, still gives respondent, brokerage firms and brokers, the following four defenses:

1) The firm or person paid the award in full or fully complied with the settlement agreement;

2) The arbitration claimant  has agreed to installment payments or has otherwise settled the matter;

3) The firm or person has filed a timely motion to vacate or modify the arbitration award and such motion has not been denied; and

4) The person or firm has filed a petition in bankruptcy and the bankruptcy proceeding is pending, or the bankruptcy court has discharged the award or payment owed under the settlement agreement.

Those with questions relating to this new procedure as announced in Regulatory Notice 10-31 should feel free to contact attorneys at SNSFE.

Source: FINRA Regulatory Notice 10-31