Arbitration case filings for year-end 2016 reflected a 7 percent increase compared to cases filed in 2015 during the same time frame.  More specifically, 3,435 cases were filed in 2015, but 3,681 cases were filed in 2016.  Of the 3,681 cases filed, 68 percent or 2,519 were customer disputes and 32 percent or 1,162 were intra-industry disputes. 

Customer claims increased by 8 percent from 2015 to 2016.  Cases proceeding through FINRA’s mediation program increased 17 percent from 2015.  Approximately 80 percent of these cases concluded with successful settlements, with the average turnaround time being 114 days.  In cases that went to a final arbitration hearing with a panel, claimants were awarded damages 41% of the time, which was 1 percent less than in 2015.

The top controversy types in customer arbitrations filed in 2016 were: breach of fiduciary duty; negligence; failure to supervise; misrepresentation; and supervision.  The top security types in customer arbitrations filed in 2016 were: common stocks; municipal bond funds; municipal bonds; mutual funds; limited partnerships and real estate investment trusts or REITs.

It is discouraging to see that arbitration case filings and customer complaints increased in 2016, especially considering the continued decrease that occurred over the previous few years.  However, panels were less likely to award damages to claimants in cases that went to final arbitration in 2016. 

As in years past, mediation and early resolution of arbitration cases in FINRA continues to be the norm rather than the exception.  Given these statistics, we continue to emphasize to our broker dealer clients the importance of supervision and to our registered representative clients the importance of documentation.  Having proper mechanisms in place for both of these ensures a stronger defense in FINRA arbitration cases.