Title: A bill to require the Financial Industry Regulatory Authority to establish a relief fund to provide investors with the full value of unpaid arbitration awards issued against brokerage firms or brokers regulated by the Authority.
Policy area: Finance and Financial Sector

Summary:
This bill directs the Financial Industry Regulatory Authority (FINRA) to compensate investors for the full value of unpaid arbitration awards. To qualify, an award must be the result of a final order issued in favor of an investor against a brokerage firm or broker regulated by FINRA.

[Congressional Bills 115th Congress]
[From the U.S. Government Publishing Office]
[S. 2499 Introduced in Senate (IS)]

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115th CONGRESS
  2d Session
                                S. 2499

 To require the Financial Industry Regulatory Authority to establish a 
    relief fund to provide investors with the full value of unpaid 
arbitration awards issued against brokerage firms or brokers regulated 
                           by the Authority.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             March 6, 2018

  Ms. Warren introduced the following bill; which was read twice and 
    referred to the Committee on Banking, Housing, and Urban Affairs

_______________________________________________________________________

                                 A BILL


 
 To require the Financial Industry Regulatory Authority to establish a 
    relief fund to provide investors with the full value of unpaid 
arbitration awards issued against brokerage firms or brokers regulated 
                           by the Authority.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. FINRA RELIEF FUND.

    (a) Definitions.--In this Act:
            (1) Bank.--The term ``bank'' means--
                    (A) a banking institution organized under the laws 
                of the United States;
                    (B) a member bank of the Federal Reserve System;
                    (C) any other banking institution--
                            (i) whether incorporated or not, doing 
                        business under the laws of any State or of the 
                        United States, a substantial portion of the 
                        business of which consists of receiving 
                        deposits or exercising fiduciary powers similar 
                        to those permitted to national banks under the 
                        authority of the Comptroller of the Currency 
                        pursuant to the first section of the Act 
                        entitled ``An Act to place authority over the 
                        trust powers of national banks in the 
                        Comptroller of the Currency'', approved 
                        September 28, 1962 (12 U.S.C. 92a);
                            (ii) supervised and examined by a State or 
                        Federal authority having supervision over 
                        banks; and
                            (iii) that is not operated for the purpose 
                        of evading the provisions of that Act; and
                    (D) a receiver, conservator, or other liquidating 
                agent of any institution or firm described in 
                subparagraph (A), (B), or (C).
            (2) Broker.--The term ``broker''--
                    (A) means any individual, corporation, partnership, 
                association, joint stock company, business trust, 
                unincorporated organization, or any other legal entity 
                engaged in the business effecting transactions in 
                securities for the account of others;
                    (B) has been admitted to membership in FINRA; and
                    (C) is not a bank.
            (3) Brokerage firm.--The term ``brokerage firm'' means any 
        broker or dealer admitted to membership in FINRA.
            (4) FINRA.--The term ``FINRA'' means the Financial Industry 
        Regulatory Authority.
            (5) Relief fund.--The term ``relief fund'' means the relief 
        fund that FINRA is required to establish under subsection (b).
    (b) Fund Established.--FINRA shall establish a relief fund that 
shall be used to provide an investor with the full value of an 
arbitration award that--
            (1) was issued in favor of the investor against a brokerage 
        firm or a broker regulated by FINRA;
            (2) was confirmed in a court of competent jurisdiction in a 
        final order that is not appealable; and
            (3) is unpaid as of the date that the investor submits a 
        claim to the relief fund.
    (c) No Limitations.--FINRA may not--
            (1) limit the amount that an investor may receive from the 
        relief fund; or
            (2) prohibit any investor from submitting a claim to the 
        relief fund.
    (d) Identification of Sufficient Funds.--FINRA shall ensure that--
            (1) there are sufficient reserves in the relief fund to 
        provide each investor that submits a valid claim to the relief 
        fund with the entire amount owed to that investor, including in 
        a year in which there may be an unusually large number of 
        unpaid arbitration awards that are subject to claims from the 
        relief fund;
            (2) the reserves described in paragraph (1) are obtained 
        from brokerage firms or brokers regulated by FINRA and not from 
        investors; and
            (3) the relief fund shall be funded first from penalties 
        paid by brokers and then from sources determined by FINRA.
    (e) Disclosure.--FINRA shall annually disclose on a publicly 
available website--
            (1) for the year covered by the disclosure, the total 
        number of arbitration awards issued in favor of investors 
        against brokerage firms or brokers regulated by FINRA, 
        including--
                    (A) the total dollar amount of such awards;
                    (B) the number of such awards that, as of the date 
                of the disclosure, are unpaid, including the total 
                dollar amount of the unpaid awards; and
                    (C) with respect to each arbitration award issued 
                against a broker regulated by FINRA--
                            (i) the name of the brokerage firm or 
                        broker regulated by FINRA against which the 
                        award was issued;
                            (ii) the total amount of the award;
                            (iii) the specific claims asserted by the 
                        investor in the arbitration;
                            (iv) the date by which the award was 
                        required to be paid in full (pursuant to FINRA 
                        rules); and
                            (v) the actual date the award was paid in 
                        full or, if any part of the award has not been 
                        paid in full, an explanation as to why not; and
            (2) beginning in the first full year after the relief fund 
        is established, the number of--
                    (A) claims made to the relief fund during the year 
                covered by the disclosure; and
                    (B) investors that made claims to the relief fund 
                that, as of the date of the disclosure, have not 
                obtained an amount from the relief fund.
    (f) Implementation.--
            (1) In general.--FINRA shall--
                    (A) not later than 1 year after the date of 
                enactment of this Act, promulgate such regulations as 
                FINRA determines are necessary to establish the relief 
                fund; and
                    (B) when adopting rules under paragraph (1), 
                establish a procedure for submitting a claim to, and 
                recovering an amount from, the relief fund that--
                            (i) reduces the burden on investors; and
                            (ii) ensures that an investor obtains an 
                        amount from the relief fund as quickly as is 
                        practicable after submitting a valid claim to 
                        the relief fund.
            (2) Failure to promulgate regulations.--If FINRA fails to 
        promulgate the regulations under paragraph (1), FINRA shall use 
        amounts made available to FINRA from its general budget to pay 
        claims made to the relief fund.
    (g) Claims.--FINRA may require investors to subrogate their claims 
against brokers and FINRA may pursue additional remedies against the 
brokers.
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