FINRA Stats, 3/19: March Case Filings Continue Weak, Leading to a Quarterly YOY Decline of 28%
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New case submissions by customers are down 29% from the first quarters tally for 2018 and industry cases have declined 27%. Overall, 830 new cases were filed in the first quarter; the number for the month of March is 250, more than February (244) and fewer than January (336).

The latest FINRA-DR statistical report, posted recently by the Dispute Resolution division on its Arbitration-Mediation section of the Authority’s Website, indicates that the 491 customer claims filed through March comprise 59% of the whole. That’s a drop from 60% and 63% registered in the first quarters of 2018 and 2017, respectively. When we look among the FINRA-DR statistics for a reason, FINRA’s “Security Type” Chart offers the most telling possibility: Municipal Bond and Municipal Bond Fund cases are off by approximately 30% year-over-year. Now, so are are common stock cases and customer cases in general. The difference is, that, in 2018, about one of every three customer claims filed involved either Municipal Bonds or Municipal Bond Fund cases There’s a clear shift in direction and the dominant reason, we’d project, has to be a fall-off in Puerto Rico bond disputes.

Interesting Stand-Outs: ATT & Settlements

We analyze these monthly reports from FINRA fairly closely and one of the ways we’ll look for trend or pattern changes is simply to scan the report for stand-out numbers. For instance, in the March report, the Overall Average Turnaround Time (ATT) currently stands at 13.5 months. Memory tells us that’s the first time in years ATT has dropped that low. We might dismiss that as an anomaly, given that sole expungement proceedings have constituted a large segment of the concluded cases. We might, except that sole expungement proceedings, by their nature, require an arbitral decision and Award, yet “Hearing Decision” ATT for 2019 exceeds by a month its 2018 counterpart (16.9 mos. v. 15.9 mos.). On the other hand, settlements constitute more than 70% of all concluded cases. That’s another stand-out, because that level of negotiated resolutions is almost radical. And, if all those settlements are happening earlier in the process than in prior years, that could explain the improved Overall ATT.

Arbitral Decisions & Win Rates

We’re not necessarily a fan of settlements. If settlements were universally a good thing, litigation in the courts would be doing a terrific job. Settlements for the wrong reasons (cost, time spent, time endured, lack of finality) represent the “why” behind arbitration. Speed, efficiency, finality are the virtues that offer arbitrating parties their proverbial “day in court.” So, we’re pleased to see a potential turnaround in the hearing figures (despite the very high settlement rate). Customer claimants are relying upon arbitrators for a decision 15% of the time -- up from an historic low of 14% in 2017. Overall, the figures have risen to 18% from 17% last year. Overall win rates are about the same as they have been for customers -- 41% thus far in 2019 (40% last year), but, in the small claims category, there’s a stark difference. The sample for 2019 is small as yet, but “paper only” cases are sporting a 45% customer win rate in 2019 (9/20)! Last year’s average was 35%; the 30s is where win rates for small claimants have been for years. Is there a change brewing (meh!)?

Hearing Decision - Win Rates

Customer Claimant Cases decided after hearing actually reflect a win rate that’s lower than the small claims rate (ed: that’s a first - probably means the small claims rate will drop as more cases are concluded0 -- 40% vs. small claims’ 45%. Interestingly, when one views just the three-panel cases, the early lead that Mixed Panels showed in the prior 2019 reports has reversed. All-Public Panels are now reflecting a 54% win rate for customers who select All-Public Panels and a far-different 37% win rate for Panels with a Non-Public Arbitrator among the three (Majority Public Panels). That was quick! Still, the statistics are not sufficiently large enough, case-wise, to be reliable. Let’s wait for the second quarter.

(SAC Ref. No. 2019-16-02)

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