FINRA’s new rule giving investors more options when a party becomes inactive is set to go into effect for cases filed on or after June 29.
We reported in SAA 2020-08 (Feb. 26) that the SEC on February 20 issued an Approval Order, which was published in the Federal Register on February 26 (Vol. 85, No. 38, Page 11157), on proposed rule SR-FINRA-2019-027. To review, the proposal’s purpose was to further reduce unpaid awards by amending the FINRA Code of Arbitration Procedure for Customer Disputes, to “... expand the options available to customers if a firm or associated person is or becomes inactive.” We said in #08: “Next is publication by the Authority of a Regulatory Notice, establishing the rule change’s effective date.”
Effective for New Cases
That day has arrived, as FINRA on April 9 issued Regulatory Notice 20-11, FINRA Amends Arbitration Code to Expand Options Available to Customers if a Firm or Associated Person Is or Becomes Inactive. Says the Notice: “FINRA amended its Code of Arbitration Procedure for Customer Disputes (Customer Code) to expand a customer’s options to withdraw an arbitration claim if a member firm or an associated person becomes inactive. These amendments also allow customers to amend pleadings, postpone hearings, request default proceedings, and receive a refund of filing fees in these situations” (footnote omitted). Our editorial comment in #08 was: “We’re guessing that for administrative simplicity the inactive industry party rule will apply to cases filed on or after the effective date, but you never know.” Turns out we were right: the amendments are effective for cases filed on or after June 29, 2020.
(ed: Of course, the impact of COVID-19 remains to be seen.)
