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August 2013

FINRA 2013 Statistics Show Filings Down and Fewer Awards In Favor Of Customers

FINRA recently released its dispute resolution statistics for January through June 2013.  Of significant interest, the statistics show a slowdown in the number of filings, a lower percentage of cases where the customer was awarded damages, and less disparity between awards entered by all public panels and panels with one industry arbitrator.

There were 20% fewer new case filings through June 2013 than there were for the same time period in 2012 which has been a consistent trend since 2009 when there was a considerably high number of filings in the wake of the unprecedented market correction.

The type of controversy involved in the 2013 filings remains consistent with breach of fiduciary duty being the most alleged claim followed by, in order, negligence, misrepresentation, failure to supervise, breach of contract, and unsuitability. The type of security involved in disputes also remained consistent with recent years with most disputes involving common stock, mutual funds and variable annuities.

Of the cases that closed during the first half of 2013, 22% were resolved by arbitrators after hearing or after review of documents, 61% settled via mediation or directly between the parties, and 18% were withdrawn or closed by other means.

Of the cases that resulted in an arbitration award, 41% resulted in an award in favor of the customer. While this is only representative of half of 2013, it is 4% lower than the results for the entire 2012 year, and the lowest percentage since FINRA began tracking this percentage in 2008.

Finally, in 2011 and 2012, FINRA’s statistics showed that all public panels awarded customers damages more often.  In 2011, the all public panels awarded customers damages in 54% of their cases whereas the panels with one industry arbitrator awarded customers damages in 18% of their cases.  In 2012, these numbers were 49% versus 33% which are closer but still show a great disparity when there is an industry arbitrator on the panel. The statistics for the first half of 2013 are even closer, 46% to 40%. The narrowing of this gap shows that the presence of one industry arbitrator on the panel does not bias the panel in favor of the industry.

D&O and Shareholder Litigation

Tamara Seelman

D&O and Shareholder Litigation