Hugh Berkson, who leads McCarthy Lebit’s investor claims practice, has completed his second term as President of the Public Investors Advocate Bar Association (“PIABA”), an international bar association comprised of attorneys who represent investors in securities arbitrations. Hugh first served as PIABA’s president in 2015 – 2016 and focused his efforts on addressing the problem of unpaid arbitration awards. His clients, and investors nationwide, were invariably shocked to learn that their trusted stockbrokers had no requirement to maintain financial responsibility needed to compensate their clients when those brokers acted wrongfully. Indeed, there was not so much as a requirement that the brokers carry insurance, like Hugh was required to do as an attorney, or his doctor was required to, or those clients had to obtain to drive their cars. As a result, he found that 33.3% of the awards in Claimants’ favor went unpaid, with 24.2% of the dollars awarded to Claimants going unpaid. In February 2016, he issued a white paper concerning unpaid awards that quickly gained national attention and was the focus of Senator Warren’s questioning of the then-head of the Financial Industry Regulatory Authority, which oversees the brokerage industry, in a Capitol Hill hearing. Although Hugh’s white paper set forth a number of potential solutions to the problem, he and PIABA knew that enacting a cure would take years.
PIABA tackles complex issues that take years, if not decades, to address. Hugh stepped into his second term in October 2022 to direct PIABA’s efforts on two principal, but related, topics. The first issue being the continued problem of unpaid awards and the second being a newer problem related to registered investment advisers’ (“RIA’s”) abuse of mandatory pre-dispute arbitration clauses. Since Hugh’s first term as President, the unpaid award problem essentially remained unchanged. As Hugh assumed office in 2022, FINRA’s statistics reported that 37% of all awards issued went unpaid, with 24% of the dollars awarded unpaid. FINRA refused to tackle the problem head-on, claiming that RIAs’ unpaid awards were also a problem, and it would be unfair to force brokers to address the problem, but not RIAs.
As a result of PIABA’s efforts, the SEC issued a report concerning RIA arbitration abuse in June 2023. In short, the SEC confirmed what Hugh and his PIABA colleagues already knew: RIAs advertise themselves as fiduciaries, who put their clients’ interest first, but use abusive arbitration clauses making it all but impossible for those clients to hold their advisers responsible when they act wrongfully. Under Hugh’s direction, PIABA staged a series of press releases, press events, and an op-ed on the topic. The publicity PIABA brought to the issue led to a series of meetings with high-ranking legislators and regulators, allowing PIABA to make meaningful progress in helping decision-makers acknowledge the problems related to RIA arbitration abuse. Additionally, it helped pave the way to address unpaid awards for both the RIA and brokerage industry.
“In a perfect world, I would have ended my term as president and proudly reported that the unpaid award problem was finally solved. However, this isn’t a problem that can be solved overnight,” Hugh said. “Instead, at the PIABA Annual October Meeting, I was able to inform the membership that PIABA made meaningful incremental progress in addressing matters important to American investors – a powerful step in this lengthy process.”
Through the course of his Presidency, PIABA strengthened its relationships with the relevant regulators within the SEC and FINRA, key legislators in both the House and Senate, and industry groups. PIABA, under Hugh’s leadership, also made meaningful strides in promoting diversity, equity, and inclusion by: (1) having a nationally renowned DEI speaker provide training to PIABA’s Board fully funded by the Board itself; (2) directing changes to PIABA’s bylaws to promote DEI; (3) welcoming back the nationally renowned DEI speaker to present to the PIABA membership at the October Annual Meeting. Hugh is particularly proud to report that the speaker panels at this year’s Annual Meeting featured a higher level of female representation on the dais than PIABA has ever seen before. While women comprise roughly 12% of PIABA’s membership, a figure PIABA aims to increase, nearly all panels at this year’s Annual Meeting featured female participants.
Hugh put a tremendous amount of time into promoting PIABA’s initiatives this year. He is confident that he has left the organization better off than when he took over last year and he believes that the leadership this coming year will build on the momentum, pushing for continued reform in the investment advice space. Hugh and PIABA continue to work to ensure that American investors can trust their financial advisers and have meaningful recourse should they fall victim to unscrupulous financial professionals.
To learn more about Hugh Berkson, read relevant articles pertaining to his involvement with PIABA during his 2023 Presidency, and explore his area of legal expertise, visit his attorney bio.