The caseload has ebbed as economic tides have flowed, according to annual figures disclosed late last month by the regulator. The number of proceedings corresponds with busts like the Great Recession and the dot-com bubble, according to one mediator and consultant.
“Whenever an event like that happens, the filings for the next three or four years go way up,” says Dana Pescosolido, a retired attorney who runs his own mediation and consulting firm.
Pescosolido describes the statistics published monthly and yearly by FINRA as “awfully basic,” and he's supplemented that information through his own study, which adds a geographic angle to the official figures.
Pescosolido found correlations between hearing locations and the client’s chances of winning a case. He even came up with a new arbitration stat he calls “slugging percentage,” a familiar term for baseball fans.
To find out more on the trends in FINRA arbitration cases, click through our slideshow.
Fewer filings in the first month of the year
Downward progression in caseload
The annual count of cases closed tumbled below the number of cases filed that year, which was the last time caseload outpaced closings before 2016.
FINRA says 3,635 cases were closed last year, compared to 3,681 cases filed. The 46-case difference pales in comparison to the disparity of 2,566 cases seen in 2009, Pescosolido notes.
“In 2009, people had lost a lot of money,” Pescosolido says. “So you’re going to get a lot of filings.”
What clients allege
Negligence (1,862 cases), failure to supervise (1,802), misrepresentation (1,670) and unsuitable investments (1,606) comprised the other top five types of claims.
Stock cases grow for fourth straight year
Clients win slightly less often in 2016
The figure, which Pescosolido refers to as the “win rate,” hit a five-year low of 38% in 2014 and a five-year peak of 45% in 2012.
Puerto Rico cases most successful
Arbitration claims have piled up against UBS and other firms over the sale of Puerto Rican bonds and closed-end funds. Both the wirehouse and Santander have
Some cases that would have led to hearings in Puerto Rico spilled into Florida due to the large caseload, according to Pescosolido. He tallied only cases contested in hearings and involving individual retail clients who hired counsel. Pescosolido says he looks forward to analyzing more than two years of data in order to gain a larger sample size.
In future years, the data could show whether FINRA arbitration panels are more sympathetic to clients in one hearing location than another across the regulator’s 71 hearing sites nationwide. (A FINRA spokeswoman said no official data broken down by location was available and declined to discuss Pescosolido’s report.)
He notes, however, that California enjoys a reputation as a “consumer-protective” state, while his home state of Florida is an “elder-protective” state. The low rate of awards for clients in New York also stood out to fellow lawyers, Pescosolido says.
“A lot of these guys attribute the low success rate to a pool of more sophisticated and industry-knowledgeable arbitrators in New York,” he says.