Every quarter, the Financial Industry Regulatory Authority (FINRA) releases the latest set of statistics concerning the number and nature of arbitration case filings and trends. This data provides valuable insights into the temperature of the financial industry, especially as it relates to the types of cases and controversy types that are most prominent at a particular moment. Member firms, individual financial advisors, and the public as a whole can examine these data points to identify industry trends and anticipate how they will evolve over the course of the following year. With the release of the arbitration case filings and trends year-end statistics for 2023, several takeaways have emerged that are worth noting and interpreting. Most significantly, the number of FINRA arbitration case filings in 2023 reflects a 27 percent increase from the previous year. Moreover, the number of customer-initiated arbitration claims grew by 12 percent in 2023 compared to the number of cases filed in 2022. As we move through the initial months of 2024, it’s worth taking some time to examine the trends that emerged in 2023 and how these findings may impact FINRA arbitration trends in 2024 and beyond. Moreover, if you need help navigating a FINRA arbitration matter or pursuing an expungement request through FINRA’s dispute resolution services, reach out to a highly qualified and caring securities law attorney for customized legal guidance at every turn.
2023 Arbitration Statistics Key Takeaways
Overall, FINRA saw a notable increase in the number of arbitration case filings in 2023 as compared to 2022. According to the most recent data, a total of 3,382 new case filings occurred in 2023, while there were only 2,671 new cases filed over the course of 2022. Of these 2023 new case filings, 1,891 were customer-initiated (accounting for 56 percent of total new case filings), and 1,491 were considered intra-industry cases (accounting for 44 percent of the new case filings). In contrast, 63 percent of new case filings in 2022 were customer-initiated (1,693 cases), and 978 were intra-industry filings (accounting for 37 percent of total new case filings in 2022).
In 2023, 3,027 cases were closed (compared to 3,564 cases that were closed in 2022). At the end of each year, a relatively equal number of case filings remained open—3,411 open cases remained in 2023, and 3,099 open cases were still active at the conclusion of 2022. Moreover, the turnaround time for case filings fell by several months between 2022 and 2023. In 2022, the overall turnaround time was 18.3 months. By the end of 2023, the turnaround time dropped to 14.6 months, marking a notable decrease in the processing time.
FINRA’s Virtual Hearing Option Continues to be Popular
When FINRA postponed in-person hearings because of the complexities and considerations associated with the COVID-19 pandemic and stay-at-home policies, it offered parties the option to attend virtual arbitration hearings as an alternative. Within the last few years, virtual arbitration has become a popular option for many parties, as it offers greater flexibility to all participants. According to FINRA, there have been 1,886 arbitration cases since December 31, 2023, that have conducted one or more hearings via Zoom (totaling 694 customer-initiated cases and 1,192 intra-industry cases). In 2023, a total of 673 cases held one or more virtual arbitration hearings, 467 of which were customer-initiated and 206 of which were intra-industry initiated. Of these hearings, 62 percent of customer-initiated contested motions for virtual hearings were granted, 38 percent were denied, and two motions remain open. Seventy-six percent of intra-industry contested motions for virtual hearings were granted, and 24 percent were denied.
Top Customer Arbitration Controversy Types in 2023
As we explore the top controversy types that were involved in FINRA customer-initiated arbitrations, it’s worth noting that a single arbitration case can include more than one controversy type. That being said, FINRA’s recently released data identified the top controversy types that were involved in customer arbitration proceedings over the course of 2023. Breach of fiduciary duty came in at number one, with 1,518 cases served (compared to 1,340 cases served in 2022). Negligence (1,408 cases), failure to supervise (1,129 cases), breach of contract (1,095 cases), and misrepresentation (1,078 cases) took the top four spots, followed by suitability (931 cases), omission of facts (881 cases), fraud (687 cases), violation of Blue Sky laws (414 cases), breach of regulation BI (408 cases), manipulation (273 cases), elder abuse (212 cases), unauthorized trading (175 cases), and errors-charges (132 cases). Churning (91 cases) rounded out the top 15 controversy types involved in customer-initiated FINRA arbitrations.
Most Common Security Types Involved in 2023 Arbitrations
The majority of customer-initiated arbitration cases in 2023 involved common stock as a security type (393 cases). The other security types that were most commonly involved in customer-initiated arbitration cases over the course of 2023 were as follows: Mutual funds (294 cases), corporate bonds (236 cases), real estate investment trust (197 cases), options (121 cases), private equities (120 cases), exchange-traded funds (95 cases), variable annuities (81 cases), annuities (78 cases), municipal bond funds (75 cases), preferred stock (73 cases), limited partnerships (68 cases), 401(k) (50 cases), structured products (47 cases), and business development company (45 cases).
How FINRA Arbitration Cases Closed in 2023
In 2023, the bulk of arbitration cases were closed via direct settlement by parties (50 percent of cases). Eighteen percent of arbitration cases were closed after arbitrators decided the outcome (15 percent after a regular hearing, 1 percent after a special proceeding hearing, and 3 percent after the review of documents). Mediation settled 16 percent of arbitration cases, 9 percent of arbitration cases were withdrawn, and 7 percent of the remaining arbitration cases were resolved by other means. These findings were pretty much in alignment with statistics from the previous year.
If you need help navigating an upcoming FINRA arbitration hearing or you are interested in making an expungement request through FINRA’s dispute resolution services, Judex Law, LLC, is here to help. Call our Colorado office today at (303) 523-4022 to discuss your case with a dedicated and friendly securities law attorney.
