FINRA Stats, 7/19: Customer Claims on a Slow Rise from Earlier Months of 2019
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Here’s the difference we’re seeing: back in January of this year, FINRA’s Office of Dispute Resolution reported in its monthly statistical disclosures that 336 cases had been filed, 176 (52%) of which were customer-related and 160 (48%) of which were intra-industry matters. In FINRA-DR’s latest monthly report, with 2,091 cases filed in the first seven months, the distribution of cases is 63% customer and 37% intra-industry.

Take that further and look at just the month of July, when 292 cases were submitted in this latest month, and we see that 71% of the new cases (208) are customer-related. Other than that, the number of new cases is remarkably close to average, relative to the initial seven months. Relative to last year at this time, when 2,579 cases had been filed, or a monthly average of 368, the current case inflow is remarkable, only in that it’s down 19% YOY. Breaking that down into the two dispute categories, we note that customer cases are down 18% YOY and intra-industry cases are down a bit more, 21%. So, we see some strength in the customer numbers.

Cases Closed, Open, and Measured

FINRA-DR is closing cases at an accelerated rate, up 9% (2,365 vs. 2,170) from last year at this time. This is the first year in a long time when the closed-case number has been significantly higher than the new case filing number; that’s likely because 2018 recorded the highest number of new case submissions since 2011. That surge pushed the “Open Case” or pending docket figures up 10% or more, so there were more cases in progress and, thus, more cases have been concluding. We’ll be “talking more” about the new Special Proceeding Rule further in this Alert -- here, we note that FINRA has added a new column to the Report that isolates the Special Proceedings cases from all others for purposes of measuring average turnaround time (ATT). That set of closed cases (still a handful of cases) is recording a 6.2 month ATT. Compared to the ATT for “Paper” close-outs, which is reflecting a historically quick ATT of 5.9 months (2018-6.7 mos.; 2017-6.7 mos.), the average Special Proceeding case might take a bit longer to process.

Win Rates for Customers

We’ve noted in recent analyses of FINRA-DR statistical reports that FINRA has broken out the win rates for customers in a number of ways, so that viewers can see the different results for the different routes taken. Special Proceedings have been added to this group of charts, so we can see that, on the customer side, claimants have completed only four Special Proceeding cases. In none of those matters has the customer prevailed -- disappointing for the Clinics and other investor advocates who have hope for this new procedure -- but still a very small sample. In the “paper” cases that follow the Simplified route, customer-claimants are experiencing a banner year, with wins for the customer up to 50% from the low to mid-30s rates recorded in recent years.

Overall, customer-claimants are still only entrusting their disputes to arbitrators 14% of the time, but they are experiencing a relatively high 46% “win” rate. FINRA breaks out customer disputes on the high end as well, where three-person panels and much larger sums are the norm. There, a real anomaly continues to form -- whereas, in last year’s tally, customers utilizing Majority Public Panels were winning monetary damages in 47% of the decided cases, this year, that percentage is a dismal 29% (10/34 cases). MPPs delivered a higher win rate for customers in 2018 than did APPs (All-Public Panels), which awarded monetary damages to customers in only 42% of the cases decided; this year, APPs have moved into high gear so far this year, ruling in the customer’s favor 57% (50/88) of the time!

(ed: FINRA’s recruiting efforts in 2019 have added to neutral roster growth virtually every month. The total continues to hover just below 8,000 (7,952), with 3,679 Public Arbitrators on board and 4,273 Non-Public Arbitrators.) (SAC Ref. 2019-33-01)

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