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FINRA Arbitrations Expected to Increase by End of the Year

Thursday, November, 5, 2015

FINRA reported a decline in arbitrations throughout 2015 compared to the previous year, but this is expected to change in the coming months. More than 2500 cases were filed this year through the end of September, compared to more than 2900 cases filed in 2014 by the same date.


FINRA officials say there is more to the numbers than might be immediately apparent. For instance, the gap between the two years is getting smaller in recent months. By the end of June, the number of cases in 2015 was 25% below 2014s numbers, but more cases are entering into agreements through mediation. Mediation statistics are 20% ahead of 2014.


FINRA also points out their case filings are countercyclical to the stock market. When the market is down there is a rise in case filings. Basically, more cases are filed when people are unhappy with their performance, whether it’s connected to fraud or not. Filings more than doubled during the Great Recession, but filings dwindled following the recent bull market. Common arbitration cases include claims of negligence, misrepresentation, and failure to supervise.


Some believe there is nowhere to go but up with filings. Some are predicting that by year-end the total number of filings will be the same as they were in 2014. They point to the market gyrations over the summer, which forced investors to file arbitration cases that are still making their way into the public records system. There is also speculation that Puerto Rican bond funds will likely play a role in the upsurge in coming months.