Every quarter, the Financial Industry Regulatory Authority (FINRA) releases the latest data concerning the number of arbitration case filings and similar industry trends. Member firms and individual securities professionals can review these filings and identify any trends that may impact the current landscape and financial marketplace. Overall, the most recently published filings (current through May 2024), indicate a notable decrease in the number of case filings when compared to the same period the previous year. So, what accounts for this dip in arbitration case filings between 2023 and 2024? Some financial industry experts speculate that FINRA’s recent adoption of stricter rules governing its expungement request process has led to a considerable drop in the number of cases filed, as financial advisors may face greater challenges when seeking to have customer dispute information removed from the Central Registration Depository (CRD) and from their BrokerCheck profiles. If you are struggling with an unfair or baseless disclosure on your BrokerCheck profile and you are ready to explore your options for having it removed, consider reaching out to a highly qualified and experienced securities law attorney for customized legal guidance. In the meantime, let’s take a look at some of the key takeaways from the most current arbitration case filings and trends released by FINRA.
FINRA Arbitration Case Filings See a Notable Decline in Volume
As compared to the first five months of 2023, the first five months of 2024 saw a significant drop in the number of arbitration case filings. According to The Neutral Corner, FINRA’s quarterly newsletter, “Arbitration case filings from January through May 2024 reflect a 26 percent decrease compared to cases filed during the same five-month period in 2023 (from 1,444 cases in 2023 to 1,066 cases in 2024).” Additionally, the number of customer-initiated cases “decreased by 10 percent through May 2024, as compared to the same period in 2023.” Although these findings were reported by FINRA without accompanying explanations, many industry professionals posit that the stricter expungement rules recently adopted and enforced by FINRA likely play a role in this drop in case filings. Since fewer advisors qualify for expungement under the newly-imposed time limits, fewer individuals are moving forward with expungement requests because they recognize their ineligibility under these amended rules. Naturally, other factors are likely influencing the decrease in arbitration case filings as well, but the impact of the stricter rules cannot be discounted.
Comparing 2024 to 2023 Arbitration Case Filings and Trends
In 2023, FINRA received a total of 1,444 new case filings between January and May, 772 of which were customer arbitrations (53 percent) and 672 of which were intra-industry new case filings (47 percent). In contrast, FINRA received a total of 1,066 new case filings during this same five-month period in 2024. Of these requests, 695 (65 percent) are customer-related, and 371 (35 percent) are considered intra-industry. Additionally, FINRA closed 1,187 cases during this period in 2023, while it has closed 1,434 cases during the same period in 2024. By May 2023, there were 3,336 open cases. At the end of May 2024, 3,046 cases remained open. Since there were fewer cases filed in 2024, the average turnaround time was shortened from 16.5 months in 2023 to 11.7 months in 2024. According to FINRA, this marks a 29 percent decrease in turnaround time and a 21 percent increase in the number of cases closed, when comparing data from 2023 to 2024. With a lower volume of cases to process, FINRA appears to be able to address and conclude cases more quickly than in previous years.
FINRA Arbitration Statistics: Top Controversy Types
It’s worth taking a look at the most common controversy types that were involved in customer arbitrations between January and May. Overall, breach of fiduciary duty remained at the top of the list in both 2023 and 2024. There were 556 cases filed involving this controversy type in 2024 and 621 cases during the same period in 2023. Negligence also remained at number two, with 565 cases in 2023 and 510 cases in 2024. Breach of Contract, which held the number three position in 2023 with 465 cases filed, fell to number five in 2024, with 430 cases filed. In 2024, failure to supervise (470 cases), misrepresentation (463), and breach of contract (430) rounded out the top five controversy types involved in customer arbitrations. Other trending controversy types in 2024 include: Omission of facts (384 cases), suitability (383 cases), fraud (305 cases), breach of regulation BI (191 cases), violation of Blue Sky laws (152 cases), manipulation (143 cases), elder abuse (79 cases), unauthorized trading (62 cases), errors-charges (39 cases), and transfer (34 cases). Cases involving manipulation, fraud, and misrepresentation saw a notable increase in the number of case filings in 2024 as compared to 2023, even though the overall number of cases filed dropped from 2023 to 2024.
Top Security Types Involved in Customer Arbitrations
The most common security types that were involved in customer arbitrations remained relatively unchanged between 2023 and 2024. The top five security types in 2024 include common stock (132 cases), real estate investment trusts (92 cases), corporate bonds (86 cases), mutual funds (55 cases), and private equities (45 cases). In contrast, the top five securities involved in customer arbitrations during the same five-month period in 2023 were as follows: Common stock (169 cases), corporate bonds (111 cases), mutual funds (93 cases), real estate investment (79 cases), and private equities (38 cases). Other popular security types involved in 2024’s customer arbitration case filings include 401(k), structured products, annuities, options, exchange-traded funds, variable annuities, municipal bond funds, limited partnerships, preferred stock, and business development companies (BDCs). No matter what the details of your unique situation may be, you can trust that enlisting the guidance of a knowledgeable and experienced securities law attorney will provide you with the customized and effective legal solutions you deserve.
If you’re looking for customized and effective legal guidance that prioritizes your best interests, Judex Law, LLC, is ready to serve you. Please call our Colorado office today at (303) 523-4022 to get started with a highly qualified and caring securities law attorney.
