I submit this comment on behalf of investors who are routinely forced into the FINRA arbitration forum after suffering significant financial losses. In my practice, I represent individuals who have lost substantial sums through elder financial fraud, ponzi schemes, and crypto currency scams. Our clients are not looking for a cheaper process at the expense of fairness or expertise. While Regulatory Notice 26-06 frames its proposals as an effort to improve efficiency and access, it fails to address one of the most immediate and consequential barriers to justice in this forum: cost.
FINRA arbitration has become too expensive. That is not a theoretical concern, it is a practical reality that directly impacts whether investors can pursue claims at all. For many victims of financial fraud, particularly those who have already lost substantial portions of their savings, the cost of arbitration is itself prohibitive. The filing fees, forum fees, hearing session fees, and associated costs can quickly escalate into tens of thousands of dollars, if not more. Even where those costs are ultimately recoverable, claimants are required to advance them or take on the financial risk of proceeding. This creates a system where access to justice depends not on the merits of the claim, but on the claimant’s ability to absorb additional financial strain. That outcome is fundamentally inconsistent with FINRA’s stated mission of investor protection.
What is particularly troubling is that these costs exist within a forum that is not voluntary. Investors do not choose FINRA arbitration as a preferred dispute resolution mechanism. They are required to use it as a condition of doing business with member firms. In that context, FINRA has an obligation to ensure that the forum is not only fair, but accessible. At present, it is neither.
Regulatory Notice 26-06 does not meaningfully address this issue. References to “efficiency” and “cost-effectiveness” are insufficient without concrete proposals to reduce the actual financial burden on claimants. Incremental procedural adjustments will not solve a problem that is structural in nature.
At a minimum, FINRA should consider: materially reducing filing and hearing fees for customer cases, shifting a greater share of forum costs to member firms, and implementing cost caps for claimants, particularly in cases involving clear allegations of fraud or unauthorized activity. Absent these changes, the arbitration process will continue to function as a barrier rather than a remedy. The Notice also raises, directly or indirectly, the possibility of allowing customers to opt out of FINRA arbitration in favor of other forums, including arbitration under the American Arbitration Association’s consumer rules. That approach is misguided. While the idea of a lower-cost forum may appear attractive on the surface, it overlooks the critical importance of specialization. FINRA arbitration exists for a reason. It is designed, at least in theory, to handle disputes involving broker-dealers, securities regulations, and complex financial products. Arbitrators in this forum are expected to have some familiarity with these issues.
Creating an off-ramp to AAA consumer arbitration does not solve the problem. It shifts it. Worse, it risks creating a two-tiered system where less sophisticated investors are funneled into a cheaper but less competent forum, while more complex claims remain in FINRA. That is not investor protection. It is fragmentation. FINRA should take this opportunity to address that issue directly. Reduce the cost of arbitration. Preserve and strengthen subject-matter expertise. Ensure that the forum is accessible to the very investors it is intended to protect. Anything less risks reinforcing the perception, and the reality, that the system is not designed with investors in mind.
FINRA Utility Menu
For the Public
FINRA DATA
FINRA Data provides non-commercial use of data, specifically the ability to save data views and create and manage a Bond Watchlist.
For Industry Professionals
FINPRO GATEWAY
Registered representatives can fulfill Continuing Education requirements, view their industry CRD record and perform other compliance tasks.
For Member Firms
FINRA GATEWAY
Firm compliance professionals can access filings and requests, run reports and submit support tickets.
For Case Participants
DR PORTAL
Arbitration and mediation case participants and FINRA neutrals can view case information and submit documents through this Dispute Resolution Portal.
Need Help? | Check System Status
Log In to other FINRA systems
MDF Law PLLC Comment On Regulatory Notice 26-06
I submit this comment on behalf of investors who are routinely forced into the FINRA arbitration forum after suffering significant financial losses. In my practice, I represent individuals who have lost substantial sums through elder financial fraud, ponzi schemes, and crypto currency scams. Our clients are not looking for a cheaper process at the expense of fairness or expertise. While Regulatory Notice 26-06 frames its proposals as an effort to improve efficiency and access, it fails to address one of the most immediate and consequential barriers to justice in this forum: cost.
FINRA arbitration has become too expensive. That is not a theoretical concern, it is a practical reality that directly impacts whether investors can pursue claims at all. For many victims of financial fraud, particularly those who have already lost substantial portions of their savings, the cost of arbitration is itself prohibitive. The filing fees, forum fees, hearing session fees, and associated costs can quickly escalate into tens of thousands of dollars, if not more. Even where those costs are ultimately recoverable, claimants are required to advance them or take on the financial risk of proceeding. This creates a system where access to justice depends not on the merits of the claim, but on the claimant’s ability to absorb additional financial strain. That outcome is fundamentally inconsistent with FINRA’s stated mission of investor protection.
What is particularly troubling is that these costs exist within a forum that is not voluntary. Investors do not choose FINRA arbitration as a preferred dispute resolution mechanism. They are required to use it as a condition of doing business with member firms. In that context, FINRA has an obligation to ensure that the forum is not only fair, but accessible. At present, it is neither.
Regulatory Notice 26-06 does not meaningfully address this issue. References to “efficiency” and “cost-effectiveness” are insufficient without concrete proposals to reduce the actual financial burden on claimants. Incremental procedural adjustments will not solve a problem that is structural in nature.
At a minimum, FINRA should consider: materially reducing filing and hearing fees for customer cases, shifting a greater share of forum costs to member firms, and implementing cost caps for claimants, particularly in cases involving clear allegations of fraud or unauthorized activity. Absent these changes, the arbitration process will continue to function as a barrier rather than a remedy. The Notice also raises, directly or indirectly, the possibility of allowing customers to opt out of FINRA arbitration in favor of other forums, including arbitration under the American Arbitration Association’s consumer rules. That approach is misguided. While the idea of a lower-cost forum may appear attractive on the surface, it overlooks the critical importance of specialization. FINRA arbitration exists for a reason. It is designed, at least in theory, to handle disputes involving broker-dealers, securities regulations, and complex financial products. Arbitrators in this forum are expected to have some familiarity with these issues.
Creating an off-ramp to AAA consumer arbitration does not solve the problem. It shifts it. Worse, it risks creating a two-tiered system where less sophisticated investors are funneled into a cheaper but less competent forum, while more complex claims remain in FINRA. That is not investor protection. It is fragmentation. FINRA should take this opportunity to address that issue directly. Reduce the cost of arbitration. Preserve and strengthen subject-matter expertise. Ensure that the forum is accessible to the very investors it is intended to protect. Anything less risks reinforcing the perception, and the reality, that the system is not designed with investors in mind.
Respectfully submitted,
Marc Fitapelli, Esq.
MDF Law PLLC