Investor Advocacy Clinic Comments on Proposal to Modify New Member Application Process

In order to effectuate our mission, the Investor Advocacy Clinic regularly reviews and comments on FINRA rule proposals. By providing objective and critical analysis, we hope to meaningfully impact and shape the culture of investing. On April 9, 2018, the clinic commented on FINRA Regulatory Notice 18-06, a proposal that would add protections for retail investors by creating a more rigorous application process for broker-dealers joining and moving between firms.

The clinic’s comment, authored by student attorneys Ben Dell’Orto, Alisa Radut, and Esmat Hanano, supported FINRA’s efforts to further protect retail investors by changing the new member application process. The modified application process will make it more difficult for broker-dealers to avoid paying arbitration claims against them by requiring that they show their ability to pay those claims before they can be hired by a firm. FINRA’s proposed changes will also prevent firms from shifting assets to avoid their obligations to investors. The changes will require certain financial disclosures on the part of the firm before they can move the assets at issue.  The clinic’s comment is available in full here.