Investor Arbitration Cases Down 14% So Far This Year: FINRA

The Financial Industry Regulatory Authority (FINRA) indicates that the number of new investor arbitration claims filed so far this year have been down about 14%, despite a slight increase in the total number of cases pursued against financial firms in 2016. 

According to the latest financial industry dispute resolution statistics, there were 3,681 cases filed last year, which represented about a 6% increase over 2015. However, in January 2017, there was a 15% drop in arbitration cases filed by clients and a 13% drop in intra-industry dispute cases, with 268 claims filed, compared to 264 brought in January 2016.

FINRA is a non-governmental agency that is responsible for overseeing the financial industry, handling all arbitration claims pursued against brokers or firms, alleging that that investments were mis-managed or mis-handled.

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In 2016, the most common investor arbitration claim involved breach of fiduciary duty, with about 2,002 cases involving that charge. That was followed by claims for broker negligence, which was raised in 1,862 claims, and 1,802 cases involving failure to supervise. Most investor arbitration cases involve multiple charges.

Although the number of new cases brought last year was up slightly from 2015, the numbers are still well below the level of investor claims pursued during the years after the financial collapse of 2009, and some experts suggest that may be because the market is doing so well. When investors are overall making more money, they are less likely to file arbitration claims over mis-management of their accounts, some experts claim.

FINRA is still handling a large number of claims stemming from Puerto Rican municipal bonds, according to a story by Investment News. There were 480 outstanding municipal bond fund cases and 433 municipal bond cases in 2016.

In recent years, UBS sold Puerto Rico bond funds, often targeting elderly individuals and others who rely on municipal bond funds for retirement. However, UBS has faced a growing number of financial fraud claims as Puerto Rico fell into economic crisis, claiming that the broker withheld important information about the risk and never should have recommended the bond funds.

Estimates suggest that UBS Puerto Rico municipal bond investors suffered losses of at least $1.66 billion during the first three quarters of 2013, and that was before they were downgraded to “junk” status in February 2014. The downgrade came after the island territory failed to address fiscal problems that include $70 billion in debt.

In October 2015, the U.S. Securities and Exchange Commission (SEC), and FINRA hit the firm with $33.5 million in fines over the Puerto Rico bond funds. At the time, FINRA ordered UBS to pay back $11 million in restitution to 165 customers who suffered losses.

FINRA indicated at the time that the company had failed in its supervisory duties in overseeing the fund for more than four years. It has ruled against USB several times in recent months, often awarding tens of millions of dollars to USB Puerto Rico Bond Fund investors.


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