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FINRA postpones arbitration hearings as pandemic disrupts wealth management

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FINRA postponed all in-person arbitration hearings scheduled to take place before May 1, upping the ante in its efforts to provide regulatory relief and ensure the public safety of advisors, firm clients and FINRA employees amid a pandemic.

“We recognize that this decision may cause inconvenience and we do not make it lightly,” the regulator said in a statement posted to its website. “We are taking this preventative action out of an abundance of caution, in the interest of public safety.”

The new policy does not affect other case and filing deadlines, according to FINRA, which also canceled a scheduled West Coast event and postponed its upcoming diversity conference.

The regulator’s move, while a welcome one to many industry players in the face of the fast-spreading coronavirus, could pose long-term headaches for arbitrators and those pursuing or defending claims in FINRA arbitration hearings.

“A lot of arbitrators and attorneys are busy, and things get scheduled pretty far in advance. It’s likely that a lot of cases that [would have been] heard in March and April may not get heard until the fall,” says attorney Tom Lewis, who has now had to postpone upcoming hearings for five arbitration cases.

“If you’re an FA and need to get your record expunged because what’s on BrokerCheck is hurting you, well this may have a material effect,” Lewis says.

Likewise, clients seeking monetary damages over investment claims may have to wait a bit longer for relief.

Andrew Stoltman, a Chicago-based attorney and former president of plaintiff attorneys association PIABA, also expects three- to six-month delays for cases that are being rescheduled.

Though potentially painful in the short term, he says, FINRA “gets the benefit of the doubt.”

There were more than 4,400 confirmed cases of coronavirus in the U.S. as of March 16, according to a New York Times database, though the number may be higher due to inadequate testing.

It’s a strict move for a firm whose advisors are known for a retail approach to client service and acquisition.
March 17

Lewis notes that while some arbitration cases are purely local, many involve attorneys, arbitrators, claimants and others who must travel some distance to appear at the arbitration. What if, he asks, “you’re in a hotel somewhere and somebody gets sick?”

Chase Carlson, a Miami-based attorney who has represented clients seeking damages from brokerage firms, says he had a case set for a final hearing which has now been postponed.

“It is frustrating that my clients have to wait, but I completely understand why FINRA does not want to risk the health of the clients, arbitrators, FINRA staf, and lawyers. Postponements can be particularly damaging to retired clients who are relying on the arbitration proceeds to live, but for most, a several-month delay will not be too harmful,” Carlson says.

Any delay, however, can’t drag into next year, Carlson cautions.

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