Stock Broker Arbitration Claims Up 49% From 2007

According to the latest figures from the Financial Industry Regulatory Authority (FINRA), through October 2008, investment arbitration claims are up 49% from 2007. In addition, during the first 10 months of 2008, more cases have been already been filed than were filed in all of last year

Most brokerage agreements contain provisions that any disputes between the investor and the broker must be submitted to binding arbitration through FINRA, which oversees about 5,000 different firms throughout the United States

Stock broker arbitration claims are filed by investors who feel that misconduct or negligence of their broker or financial advisor caused them to suffer financial loss.

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According to the latest figures released by FINRA, there have been 3,972 broker arbitration claims filed through the end of October 2008, compared with 2,672 through October 2007 and 3,238 filed for all of 2007.

The most common types of controversies involved in the stock broker arbitration claims filed this year include breach of fiduciary duty (2,263 cases), misrepresentation (1,577), breach of contract (1,309), negligence (1,244), and unsuitable recommendations (919).

The most common types of securities involved in the investor arbitration claims were mutual funds (811 cases), common stock (599), derivative securities (674), common stock (599), auction rate securities (264) and annuities (177).

When compared to 2007, the largest increases were seen in arbitration cases involving mutual funds, with more than twice as many cases filed so far this year involving mutual funds than in all of last year.

Following the collapse of the subprime mortgage market towards the end of 2007, a number of mutual funds have dropped substantially, leading to a number of stock broker arbitration claims over funds that were sold as relatively safe investment alternatives to cash or money market funds.

In particular, there have been a number of cases filed in recent months by investors who lost substantial portions of their investments placed in bond funds, like Schwab YieldPlus and Regions Morgan Keegan Bond Funds.


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