05.18.22

Consumer Groups Call for SEC Probe of RIAs' Use of Mandatory Arbitration

by: Mark Schoeff, Jr.

A coalition of consumer and investor advocacy groups is urging the U.S. Securities and Exchange Commission (SEC) to probe the use of mandatory arbitration among registered investment advisors (RIAs), out of concern "that RIAs are not adequately disclosing their use of pre-dispute arbitration clauses and may be disadvantaging investors by designating expensive forums and otherwise limiting investors' rights to pursue their claims." They said unregulated use of such clauses "has created significant and unfair barriers for investors seeking nothing more than to exercise their legal rights after a dispute with their financial professional." RIAs employ private arbitration forums that lean toward charging tens of thousands of dollars more than the Financial Industry Regulatory Authority's system to hear arbitration cases. The coalition asked the SEC to collect arbitration data during RIA exams that includes the venues they designate to hear cases, whether they permit class actions and whether there are limits on the types of claims.

Read the full article on InvestmentNews