Notice to Investors: Global Settlement - Options for Seeking Compensation Through FINRA Dispute Resolution

On April 28, 2003, NASD, the Securities and Exchange Commission (SEC), the New York Stock Exchange (NYSE), the National Association of State Securities Administrators (NASAA), and the New York State Attorney General announced the final terms of the Global Settlement of Conflicts of Interest Between Research and Investment Banking (Global Settlement). The Global Settlement followed joint investigations by the regulators into alleged conflicts of interest between investment banking and securities research at brokerage firms.

As a result of the investigation, ten of the nation's top investment firms agreed to pay $1.4 billion—$387.5 million of it in restitution to be returned to harmed investors through a process overseen by the SEC, and $487.5 million in penalties. Funds have also been earmarked for investor education and to help pay for independent research for investors. The firms have also agreed to reforms in the way they do business to help prevent these conflicts in the future.

Investors can find more information about the Global Settlement of Conflicts of Interest Between Research and Investment Banking and the future Distribution Funds from the Global Settlement on this Web Site.

The Global Settlement expressly provides that investors who are eligible to receive payments from the Distribution Funds are not precluded from seeking other remedies, including arbitration and mediation. In the aftermath of the Global Settlement, there may be an increased number of arbitration or mediation claims from investors relating to the allegations in the Global Settlement. Investors may file such claims as provided in the Code of Arbitration Procedure and How to Start a Mediation or Arbitration.

Investors who already have ongoing arbitrations against a broker/dealer that was a party to the Global Settlement, and who want to include allegations from the Global Settlement, may choose one of these options:

  1. Amend the claim to include allegations based on the Global Settlement. A party may amend its claim at any time before arbitrators have been appointed. After arbitrators have been appointed in a case, a party must obtain the arbitrators’ consent to amend his or her claim, as provided in Rule 10328.
  2. Request the arbitrators to dismiss the current case without prejudice and file a new arbitration claim that includes allegations based on the Global Settlement. Pursuant to Rule 10305, the arbitration panel has discretion to dismiss an arbitration proceeding without prejudice either at the request of a party or on the panel’s own initiative.

Investors should discuss the consequences of these options with their counsel, if any. Investors should be aware that, in a given case, the arbitration panel might decide that the arbitration has progressed too far to permit a party to amend the claim or dismiss it without causing harm to the other parties. If a request to amend or dismiss the claim is denied, investors may wish to continue with their ongoing case and file a new claim based on the Global Settlement. Parties also may ask the arbitrators to provide a reason for their decision.