Subject: File No. DF Title II - BD Liquidation
From: Barry D. Estell, Esq.
Affiliation: Attorney Representing Customers in FINRA Arbitration

August 17, 2010

Investors receive no award in 60% of all claims brought against Finra member firms. In the 40% of the cases where customrs "win" they, on average, receive only 30% of their damages. The GAO found that half of the customer "wins" were never paid in full. Against still existing member firms with the ability to pay, the "wins" are often little more than filing fees. It is not fair under any rational use of the term.

It is not fast compared to state court unless the Finra member firm wants it to be. Even if it were the opportunity to receive all one's damages, including interest and attorney fees under state blue sky laws, would certainly merit the time. Settlements would be measured against that standard, not the Finra mediator mantra that "even if you win, you won't get back more than 30% of your money and you have less than a 50% chance of winning, so you'd better take the 10%-20% of losses being offered."

It is not inexpensive for customers. It is only cheap for Finra member firms because they always win. It is expensive for customers because they pay high forum fees, often leaving them with little after expenses. Under the Uniform State Securities Act, interest, costs, and attorney fees are mandatory in court. In the two states where I practice, there has never been a statutory award in over 20 years of arbitration. Finra should not be allowed to rescind state securities laws for its members' benefit.

A commenter noted that customers receive a "hearing of equity". That's Finra-Speak for ignore the law and take care of our members. When a customer goes to an arbitration hearing there is only one person in the room not being paid, directly or indirectly, by his adversary and that's his or her own lawyer. Everyone else is paid by the Respondent brokerage firms or their hired toadies at Finra, a trade association of the brokerage industry answerable to the brokerage industry.

Investors already pay for their state court systems through taxes, but are denied those courts' protection. If the securities industry were required to face real judges and juries and pay real damages rather than a nominal fraction of its ill-gotten gains, conduct could be expected to improve significantly. Taking the profit out of fraud to discourage it instead of rewarding bad conduct with a biased damage control system should result in less fraud.

If it were fast, fair, and inexpensive it wouldn't have to be mandatory. Let the free market decide if Finra is a good deal. Most investors don't think so.