The Bates Group recently posted a report analyzing FINRA’s dispute resolution stats through the third quarter.
The chart-rich 2023 FINRA Arbitration Award Stats: What’s Trending, What’s Not? leads with: “With the year wrapping up soon, we are taking a look at what is and is not trending in matters resolved through FINRA arbitration through the first nine months of 2023. The following analysis utilizes data from Securities Arbitration Commentator and FINRA.” These are the headlines (ed: repeated verbatim; footnotes are omitted):
The Big Picture – Fewer Cases Closing Each Year: Through September of each year, and on an annual basis, the number of disputes closed has been declining. This is a long-term trend going back at least a decade following a similar decline in disputes filed – no real surprise to those who work in the FINRA arbitration space and have experienced the impact of recent bull markets, the transition of advisors away from broker-dealer firms to registered investment advisory firms, and advancements in firms’ compliance and supervisory systems.
Types of Disputes: Nearly half (49.2%) of the disputes resolved through the FINRA arbitration process in the first nine months of 2023 were Employee–Member cases, and 29.6% were Customer–Member cases.
Employee–Member Disputes: The majority of allegations for Employee–Member disputes that were arbitrated through September 2023 involve Expungement of Customer Disputes and Reformation of U5 Disclosures. Together, these two allegations represent 95.9% of the total Employee–Member dispute allegations.
Customer–Member Disputes: The main eight allegations associated with Customer–Member disputes that were arbitrated through September 2023 [suitability; misrepresentation; failure to obey customer; loan default; unauthorized trading; breach of contract; misappropriations; churning] …. These allegations represent 82% of the total allegations seen in Customer-Member disputes arbitrated through September 2023.
The Hidden Statistic: A smaller percentage of Customer–Member disputes are being resolved through direct settlement: In 2022 and YTD 2023, FINRA reports the percentage of cases decided by Arbitrators has increased when compared to the prior three years. The same trend is exhibited for cases being decided through mediation, with the percentage of cases decided through direct settlement declining by close to 10%.
(ed: *Kudos to the Bates Group for compiling this analysis. We especially liked the charts and graphs. **Thank you for the h/t to the Alert.)
