The University of Miami Investor Rights Clinic assisted in drafting state legislation broadening the Securities Guaranty Fund. The changes would allow more access to the Securities Guaranty Fund by victims of securities fraud violations who hold unsatisfied judgments and confirmed arbitration awards for violations of Florida's Securities and Investor Protection Act.
On May 10, 2024, the Florida governor signed Senate Bill 532 amending Florida’s Securities Act, including the amended Securities Guaranty Fund, 517.131. Under Associate Director Melanie Cherdack, the clinic's students worked with the Florida Bar's 517 Task Force and the Florida Office of Financial Regulation to modernize Florida's Securities Act and improve investor protection.
"This was a terrific opportunity for our students to participate in modernizing our antiquated securities act," said Cherdack. "The task force was able to use our students’ research of comparable enforcement provisions and penalties throughout the country in updating and enhancing the powers of our state securities regulators to penalize bad actors."
The clinic's students assisted the task force and the OFR by researching and proposing language to increase various investor protection provisions in the statute.
The amendments, effective October 1, 2024, also revise eligibility and recovery provisions of the Securities Guaranty Fund, which was created to provide relief to victims of Florida Securities Act violations who are entitled to monetary damages or restitution but cannot recover the total amount of such damages or restitution from the wrongdoer. The amendment removes a two-year waiting period for payment, increases the amount an eligible person may recover from the Fund from $10,000 to $15,000, and adds an enhanced recovery of up to $25,000 if the victim was 65 years or older or disabled. The amendment additionally provides for recovery by receivers.
"I am so glad to have played a supporting role in the task force’s endeavor," said Morgan Williams, J.D. '24. "This really was an incredible opportunity. Our team spent weeks researching, comparing, and discussing securities laws across the 50 states. I am overjoyed to hear that some of our findings will be incorporated into Florida’s investor protection scheme."
The Securities Guaranty Fund will be the only state securities restitution fund to provide for recovery for confirmed unpaid arbitration awards in addition to final judgments in court, making it the broadest state securities restitution fund in the country. According to the Financial Industry Regulatory Authority's published data, approximately 27% of arbitration awards go unpaid, making this a nationwide problem. The enhancement will provide some relief for Florida residents who hold unpaid arbitration awards after the effective date of the statute's amendment.
The School of Law's clinic provides, at no cost, a resource to individuals of modest means who have suffered investment losses as a result of broker misconduct but, due to the size of their claim, cannot find legal representation.
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