If you read this blog even semi-regularly, you know that I have taken a few shots at PIABA. I think they’re well earned, but some people – particularly PIABA lawyers, not surprisingly – have suggested that I’m overdoing it. Well, if you ever had any doubt that the motivation behind pretty much everything that PIABA does is simply doing whatever it can to ensure that its attorneys get paid, just take a look at PIABA’s comment to FINRA’s recent proposal to address rogue broker-dealers.

I have already written about that proposal, which is flawed in a number of fundamental ways, in my view. As expected, it elicited a bunch of comments. PIABA submitted its own comment, naturally, and, in a development that surprised exactly no one, it stated that its principal concern with the proposed rules is that they “will not cure the long-standing unpaid arbitration award issue.” Well, there you go. Leave it to PIABA to take a proposal designed by FINRA to address misconduct by rogue brokers and rogue firms – or as FINRA expressly phrased it, “to address the risks that can be posed to investors and the broader market by individual brokers and member firms that have a history of misconduct” – and focus instead on another issue, i.e., the one component of that proposal that impacts PIABA members’ pocketbooks. That is, rather than acknowledging that the proposal’s primary goal is to eliminate (or at least deter) misconduct, PIABA has chosen instead to complain that perhaps the most ridiculous aspect of the rule proposal – the creation of a fund, sourced by the BD itself, with money that would not constitute an allowable asset in the firm’s net capital computation, and which cannot be used for any purpose other than the satisfaction of a customer claim – somehow doesn’t go far enough to ensure that arbitration claimants – and their lawyers, of course – get paid.

PIABA selfishly misses the point of the proposed rule. The requirement that a BD would have to put money aside solely for the benefit of claimants who choose to file arbitrations is so absolutely crazy, so ridiculous, so financially devastating, that FINRA clearly hopes and expects that to avoid it, any reasonable BD would fire enough “bad” brokers to fall below whatever numerical threshold FINRA establishes to qualify for the sanction. In other words, FINRA probably doesn’t actually expect any firm to have to create these pools of money devoted exclusively to arbitration claimants; rather, it knows that this requirement will serve as a deterrent so grotesque that no firm would ever allow it happen.

I suppose that is the real problem for PIABA. That these pools of money may never, in fact, materialize, as firms do whatever they can to avoid the need to fund them. And there, right there, is your window into PIABA’s soul: it does not care at all that the rule proposal may conceivably achieve what FINRA intends, i.e., a reduction in the number of RRs at any given firm with significant disciplinary histories. PIABA doesn’t care about that . . . unless that result is accompanied by a requirement that the pools of money be established. Cleaning up the securities industry is, quite plainly, not PIABA’s goal. That would be ok, but, ultimately, it is not nearly as critical to PIABA as ensuring that arbitration awards get paid.

PIABA’s priorities are clear. Anyone who actually believes that PIABA is interested in eliminating bad reps or bad firms is delusional. Indeed, imagine a perfect world where no RR ever does anything wrong. There would be no one to sue! No arbitrations to file! But, alas, no legal fees to be earned. That is not the world that PIABA dreams about. It wants bad reps. It wants bad firms. So they can be named in arbitrations.