Securities Fraud Case Filings Up 86% This Year

According to the latest statistics released by the Financial Industry Regulatory Authority (FINRA), which regulates all securities firms throughout the United States, new securities fraud case filings were up 86% over the first three months of this year.

FINRA is a non-governmental regulatory body that was formed in July 2007 as a successor to the National Association of Securities Dealers, Inc. (NASD), handling resolution of disputes between investors and over 5,000 brokerage firms.

Securities fraud arbitration through FINRA are brought for a variety of disputes and controversies involving the handling of customer accounts. Typically claims involve allegations of breach of contract, breach of fiduciary duty, negligence, misrepresentation, unsuitable investment recommendations, unauthorized trading, churning or other claims that transactions were mishandled.

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The latest FINRA dispute resolution statistics released by FINRA on April 22, 2009, indicate that through March 1,715 new securities fraud cases have been filed, which is an 86% increase from the first three months of 2008 (922) and more than double the number of cases filed over the same period in 2007 (825).

The largest increase was seen among securities cases involving mutual funds, with 362 new arbitration cases filed through March. This nearly matches total number of mutual fund arbitration cases filed during all of 2007 (395) and puts it on pace for the full year to exceed the number filed in 2008 (930) by more than 500 cases. Other substantial increases were seen in cases with designated security types of common stock and corporate bonds.

The jump in new securities fraud case filings started last year, following the collapse of the subprime mortgage market towards the end of 2007 and continuing with the collapse of the financial markets in late 2008.

Last year, FINRA indicates that approximately 74% of all securities fraud claims filed by investors resulted in a monetary or non-monetary recovery in favor of the investor, either through settlement or an arbitration award.

Of those that were resolved through arbitration, as opposed to direct settlement, mediation or other means, 59 out of the 125 cases decided through March (47%) resulted in the investor being awarded damages. This compares to 199 out of 474 cases (42%) in 2008 and 245 out of 671 cases (37%) in 2007.


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