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FINRA Stats, 9/16: New Case Filings Subside; Total Remains Ahead of Last Year
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New case submissions for 2016 have run well ahead of last year’s new case statistics, month after month this year, and in August, we reported an especially large monthly tally of 362 (SAA 2016-36); however, in September, the number of new cases fell back to the average monthly range, coming in at 298.

Thus, at the three-quarter mark, the new filings total is running pretty close to the 300/month average and, with the exception of August, has been remarkably steady in that range. As we see little on the year-end horizon to change the tide, we project the final case inflow figures to come in ahead of last year’s total (3,435), but short of the total for 2014 (3,822). Through September, the tally was 2,806, 11% ahead of the same-period 2015 (2,579).

Accounting for the Growth

That 11% growth can be attributed to customer claims (1,965), as opposed to intra-industry claims (841). New cases involving customers increased by 15% in 2016, while intra-industry cases advanced by only ten cases (or 1%). Most of the 15 “Controversy Types” in FINRA’s monthly statistical report for September reflect large increases, usually more than 11%; only two, “Transfers” and “Margin Calls” reflected neutral or declining totals. On the “Security Types” side, FINRA-DR again recorded increases in most product-types, but a sizeable number showed decreases. Limited partnership cases almost tripled from the first nine months of 2015 (142 v. 58). Substantial increases also appeared in the “Structured Products” category (43 v. 23), “Annuities” (88 v. 62) and the “Exchange-Traded Funds” column (109 v. 83). Unlike ETFs, however, “Mutual Funds” stayed about even (266 v. 270), as did “Variable Annuities” (89 v. 85). Those that declined most, in terms of claims involving the named securities groups, are “Preferred Stock” (56 v. 109) and “Government Securities” (76 v. 131). Other significant categories that appear to be subsiding this year are “Municipal Bond Funds (410 v. 422) and “Municipal Bonds” (353 v. 388) – can it be the flow of new Puerto Rico bond cases is tapering down?

Customer Outcomes

While 22% of all cases closed in the first three quarters were decided by arbitrators, only 17% of all customer claims come before a panel for decision. The 40% “win” rate for customers is the second lowest in the most recent six years; that rate aggregates the “win” rates for Small Claims and two types of three-person Panels (All-Public & Mixed). We extrapolated a 40% “win” rate for the single-arbitrator cases (mostly Small Claims) and FINRA reported a 37% “win” rate for Mixed-Panel cases and 42% for All-Public Panel cases. Those are relatively close “win” percentages, considering only 303 cases comprise the whole (122 “wins”).

(ed: *FINRA is nearing the 7,000 mark, in terms of the number of arbitrators comprising its Neutral Roster. ODR added another 74 arbitrators in September (41 Public Arbitrators (total: 3,177) and 31 Non-Public Arbitrators (Total: 3,802)). FINRA staff have recruited a net 600-plus arbitrators since July 2015, according to the monthly reports, and 100 in just the past two months; the total now stands at 6,979, an impressive staff accomplishment.) (SAC Ref. No. 2016-40-02)

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