FINRA Statistics Show 2010 Was Favorable to Investors with Arbitration Claims

The number of multi-million dollar arbitration awards issued by FINRA in 2010 led many industry professionals to assert that the arbitration process was slowly becoming fairer to investors. (For details, read our Oct. 25, 2010 post.) The December 2010 statistics recently released by FINRA seem to indicate there may be some truth to those claims.

Last year, investors were awarded damages in 47 percent of the cases heard by a FINRA arbitration panel. That’s a higher percentage than any other year in the past six years. (The closest was 2009 with 45 percent. 2007 was the worst year in the past six years for investor awards, with only 37 percent of arbitration cases concluding with a customer award for damages.)

As in the past five years, 2010 arbitration cases primarily involved mutual funds (863 cases) and common stock (862 cases). Variable annuities (270 cases) were the next most common type of investment involved in arbitration cases last year.

The top five types of arbitration claims filed in 2010 were cases related to 1) breach of fiduciary duty, 2) negligence, 3) misrepresentation, 4) failure to supervise, and 5) breach of contract. Breach of fiduciary duty has been the most common type of arbitration claim filed every year since 2006. Cases involving omission of facts and claims of unsuitability were also prevalent last year.

Overall, there was a 20 percent reduction in arbitration cases filed in 2010 compared to 2009 but a 37 percent increase in cases closed.


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