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FINRA Stats, 5/15
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With five months of the year done, the dispute resolution forum’s case filings were running 27% below the same-period figures for 2014 and close-outs were down 7%.

In 2013/2014, the new submissions were relatively stable volume-wise, but, in 2015, filings dropped, mostly, it seems, as a fall in the number of new customer claims occurred.

Open and Closed Cases

The 1,241 cases entering the FINRA-DR forum through May 2015 compares with 1,691 new submissions received through May 2014. In 2013, close-outs exceeded the 1,602 new filings by 24% through May of that year. In 2014, close-outs trailed the new inflow at this point in the cycle, which we read as meaning there was little case burden remaining from earlier years.

However, this year, at 1,490, the number of closed cases is running 20% above new inflow, a reflection of the fact that the cases being closed are, for the most part, from the 2014 submissions. We can get some sense that assumption is true by looking at the Awards issuing through May 2015. According to SAC’s Award Database, more than 50% of the Awards (including Stipulated Awards) that issued in first five months of 2015 were first filed in 2014 and more than 85% were first filed in 2013 or 2014.

More Cases Being Heard

The Award Database shows more than 500 Awards issued by FINRA through May 2015, while FINRA shows only 372. Stipulated Awards account for the difference, as FINRA reports those Awards in the “All Others” category. Those 372 Awards, though, account for 25% of all close-outs, several points higher than what we have seen in previous years. That’s a refreshing trend, as it suggests that more Claimants feel they can opt for a hearing. Those cases are being heard, rather than settling – and, sure enough, only 56% of cases are being settled versus 60% at this time last year.

Win Rates Up; ATTs Down

This increased inclination to try vs. settle may be stimulated by a number of factors. First of all, we can tell from the FINRA Report that customer-claimants are participating in this trend (if not leading it). The incidence of Hearing Decisions in customer-claimant cases is higher than in the past six years; it has risen 2 percentage points in the past year and three points since 2013 (21% vs. 18%). We see that average turnaround time for cases going to hearing peaked at about 20 months some time in 2014 and that it has moderated since then. As of the May FINRA statistical report, Hearing Decisions were taking an average of 17.3 months from filing to Award. Moreover, on the customer side, an uptick is discernible in the “win” rate, which has risen to 41% from 38% for all customer cases (including Small Claims) and, for larger cases with three-person panels, the customer “win” rate is currently at 44%, up from 2014’s full-year calculation of 41%.

Increased Use of All-Public Panels

Is the option of selecting an all-public panel (APP) also having an impact on customers’ resolve to go forward to Award. Certainly, the percentage of customer-claimants opting for APPs has risen. In 2013 (128 v. 107) and 2014 (135 v. 104), more customers chose APPs than not, but in 2015, more than two-thirds of the Awards (69%) were rendered by APPs (72/104). Now, it could be that an even higher percentage of customers are opting for the APP at the ranking phase, but FINRA no longer releases that information. This would be so, if, for instance, broker-dealer respondents were more inclined to settle cases where APPs have been appointed. FINRA does not break out the percentage of customer cases that settle either, nor does it indicate whether a settlement occurred in a case with an APP or a mixed panel. These would be interesting and telling statistics (sigh!).

Arbitrators by Type

With the increased use of APPs, the emphasis grows towards ensuring that enough Public Arbitrators will be available to handle any surge in cases. With Non-Public Arbitrators occupying only about 15% of the available arbitrator seats, it was surprising to see FINRA last year float a proposal to further “purify” those ranks (SR-FINRA-20014-028; SAA 2015-08). The impact has begun to be realized, as FINRA moves to implement the new classification criteria. In May, as compared to April 2015, the number of Public Arbitrators on the FINRA roster of neutrals dropped from 3,511 to 3,398. Some of the re-classified Public Arbitrators no longer qualify as Non-Public or Public, while some were re-classified as Non-Public. The ranks of Non-Public Arbitrators changed from 2,865 in number to 2,915.

(ed: The June statistical report just hit the Web as we were heading to publication. We were surprised to find that the number of Public Arbitrators rebounded to3,497 from May to June – and the number of Non-Public Arbitrators dropped by almost a hundred to 2,915! Since FINRA itself estimated the impact at a loss of about 20% of its Public Arbitrators – and made the rule effective June 26 – we are at a loss ourselves.) (SAC Ref. No. 2015-26-01)

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