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2012 FINRA Arbitration by the Numbers

FINRA Dispute Resolution has released its arbitration statistics for 2012, the first full year of the optional all-public arbitrator panel1. In cases in which the customer selected a panel comprised of all public arbitrators, 49% of the customers were awarded damages. In cases decided by a majority-public panel, only 33% of customers were awarded damages.

Pursuant to FINRA rules, claims seeking more than $100,000, or an unspecified amount of, damages are decided by a panel of three arbitrators. Any time prior to 35 days after service of the Statement of Claim, the customer may elect to proceed with an all-public panel or majority-public panel – consisting of two public and one non-public (often referred to as “industry”) arbitrator. Absent a timely election by the customer, a majority-public panel will be appointed.

According to FINRA, a total of 570 customer claimant cases were decided in 2012. Of those, 210 were decided by three-member panels. 99 cases were heard by an all-public panel. 111 cases were decided by majority-public panels. Of the 99 all-public panel cases, damages were awarded to 47 customers (49%); but only 37 customers (33%) in the majority-public cases were awarded anything.

FINRA states that 4,299 new cases were filed in 2012, down 9% from 2011. According to FINRA, breach of fiduciary duty was the most prevalent claim made in 2012, with negligence claims a close second. The majority of FINRA cases filed in 2012 involved common stocks.

According to FINRA, of all the cases closed in 2012, 60% were settled; 21% were decided by arbitrators – after hearing or on the papers; and the remainder were closed for other reasons.

1 The option for customers to select an all-public arbitrator panel was implemented on February 1, 2011.

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