FINRA Special Arbitration Procedure (SAP)

Investors who bought the allegedly liquid Auction Rate Securities and were involved in the Auction Rate Securities Regulatory settlements may participate in FINRA’s Special Arbitration Procedure (SAP) to recover consequential damages for not being able to access their cash. If an investor received a buyback offer from a firm that participated in a settlement with FINRA or the SEC, they may be eligible to file a claim under FINRA’s SAP. The SAP is for the recovery of consequential damages only and it is the investor’s burden to prove they suffered consequential damages and that those damages were caused by their inability to access their cash. Under SAP, the firm who sold the ARS pays all forum and filing fees, hearing fees and other associated fees assessed by FINRA. Once the investor’s claim is filed, the firm cannot contest liability relating to the illiquidity of the underlying ARS position or to the ARS sales, including any claims of misrepresentations or omissions of its agents. Furthermore, the firm cannot use the investor’s decision not to sell their ARS holdings prior to the ARS settlement date. All investor claims for consequential damages under $1,000,000 will be decided by an in person hearing with a single arbitrator who is chair qualified. Cases for damages under $100,000 are heard by a telephonic hearing only, unless otherwise agreed upon by the parties. Due to limited discovery and shortened timelines the goal is to be able to have an evidentiary hearing within six months from the date of filing the SAP claim.

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