So far this year, the statistics posted by the FINRA Office of Dispute Resolution for new case submissions have shown growing increases month after month – especially in customer-initiated claims.
So, clearly, 2016 has begun the year at an accelerated pace over the same period in 2015. When we began looking for the cause of that increase – where is this surge in cases coming from? – we realized that the flow has actually been pretty steady at around 300 cases per month during 2016. The surge in percentages is primarily attributable to a very weak same-period in 2015. For the first four months of 2015, only 957 cases were filed (less than 3,000 annualized), whereas, for the full year, FINRA recorded 3,435 new cases filed. 2015’s inflow grew stronger in the later months of the year. With 1,187 cases filed in the first four months of 2016, FINRA-ODR is on track to beat last year, but only by single digits.
New Cases, 2014-2016
For some perspective, look to 2014, where 1,348 new cases had been filed at the end of the first four months, 918 of which were customer-related claims. Customer claims fell from 68% to 65% of the whole in 2015 (vs. 2014) and totaled only 623 customer-related claims. In the first third of 2016, the number of customer claims has soared percentage-wise to 818 (and 69% of the whole), but that still remains 100 fewer cases than in 2014 at this time. So, there has been a rebound and we may have seen the “bottom of the barrel,” but the strength in numbers during the remainder of the year will signal the longer-term trend.
Open Cases, 2014-2016
We tend to believe that the more cases in the ODR pipeline, the more congestion one might expect, and, thus, the longer cases will generally take to conclusion. FINRA has added an “open case” figure to its statistical reports this year and, indeed, the number is on the increase from last year (4,594 vs. 4,421) – and it was even higher at this point in 2014 (4,741). That figure represents FINRA-ODR’s “inventory” of cases, while the number of closed cases has been remarkably stable (1,251 in 2014; 1,213 in 2015; and 1,210 in 2016). We can expect, then, that average turnaround time (ATT) will tend to increase, to the extent new case inflows start to exceed that concluded-case norm – and ATT is actually displaying that pattern at this time (15.1 mos. in 2014, dropping to 14.4 mos. in 2015, and rising again to 14.8 mos. in 2016) – but the current rise in case filings would not seem to threaten serious congestion.
We have been at FINRA arbitrator recruiting sessions in the past; we have not seen one lately, but we’d bet the chuckling has stopped. The current honorarium, plus, we are sure, more aggressive efforts by the ODR staff, have moved the numbers up dramatically – FINRA’s neutral roster is growing! In March, 55 arbitrators were added in a single month. This month was not as fruitful, but, once again, there was an increase. The total moved up from 6,727 last month to 6,741 this month, with a net increase of five Public Arbitrators (3,058) and nine Non-Public Arbitrators (3,683). Relating this to the DR Task Force Report, we would say the consensus DRTF recommendation to increase honoraria even further would be sure to raise the numbers and, with due respect to those arbitrators currently on the neutral roster, it would also aid recruiting of quality talent.
(ed: We love the new information FINRA-ODR has added to the statistical report; still, we have one serious gripe. The entire report runs only a handful of pages, when viewed on the Website, but the data flattens out when you attempt to print – it’s no longer WYSIWYG, to use an acronym that should be obsolete. Whether one creates a PDF first or prints directly from the Website, the report prints page after page of disorganized data – 42 pages for this report!) (SAC Ref. No. 2016-20-02)
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