In Congress, Securities and Exchange Commission

On May 17, 2022, a coalition of twelve leading worker, consumer and investor advocates urged the U.S. Securities and Exchange Commission (SEC) to investigate the growing use of pre-dispute arbitration clauses by registered investment advisers (RIAs). In a letter to SEC Chairman Gary Gensler, the coalition requested the investigation because of concerns “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.” The coalition’s letter also expressed concern about the lack of transparency in how mandatory arbitration affects, often negatively, clients of RIAs. “This lack of transparency is particularly troubling in the context of recent trends in the securities industry, which show mass migration of assets from FINRA-registered broker-dealers to SEC- and state-registered RIAs,” the coalition wrote.  The following morning, on May 18, Chairman Gensler faced additional questions about the use of “forced” arbitration clauses by RIA’s during an appearance before the House Appropriations Subcommittee on Financial Services and General Government.

Signatories to the May 17th letter include the following organizations: American Federation of Labor and Congress of Industrial Organizations (AFL-CIO); American Federation of State, County and Municipal Employees (AFSCME); Americans for Financial Reform Education Fund; American Association for Justice; Better Markets; Center for American Progress; Consumer Action; Consumer Federation of America; Public Citizen; Public Investors Advocate Bar Association; Revolving Door Project; and 20/20 Vision.

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