Econintersect: ThinkAdvisor has conducted a number of interviews of brokers and advisors in the early to mid second quarter. They report having uncovered a pattern that “many say” is “deeply flawed, even horribly broken” with regard to the disposition of the mandatory arbitration between brokers and investment advisors and the Wall Street firms that constitute the membership of FINRA (Financial Industry Regulatory Authority), a self-regulatory organization for the financial industry. Â
Click on image to view Vimeo lyric video:Â Capital Cities “Kangaroo Court”.
In an article in late May, ThinkAdvisor‘s Jane Wollman Rusoff wrote:
The Financial Industry Regulatory Authority’s arbitration forum that’s meant to resolve advisor-firm disputes is a farce, a kangaroo court – an appalling, broken, despicable system that is rigged against advisors.
The Rusoff article summarizes the bulk of the cases having one or both of two characteristics. The first involve promissory notes signed by brokers when they move from one firm to another. These notes are either to be repaid in part or in full through a cash payment (usually if the broker moves on before a specified time period has passed) or through working at the firm for the specified period of time.
The second characteristic involves complaints by a broker against a firm for failure to comply with concessions offered and commitments made in their recruitment process.
The article quotes sources who say the first category (complaints by firms against brokers are almost always fully heard and found (93% of the time) in favor of the firms. The second category of complaint is usually ignored.  ThinkAdvisor says that often there is limited documentation to support the broker/advisor complaint and the firms ignore requests for documents that could support.
The article provides numerous quotes from FINRA officials defending the legitimacy of their arbitration process.
