Stockbroker Fraud Arbitration Claims Continue Sharp Increase Over Last Year
The number of claims filed by investors over stockbroker fraud and other breaches of fiduciary duty continue to grow this year, according to the latest statistics released by the Financial Regulatory Authority (FINRA), which regulates more than 5,000 brokerage frims throughout the United States.
For the first five months of this year, the number of stockbroker fraud arbitration claims filed, which allege that money managers and financial firms mishandled investor money, increased by 85% over the same period of time last year, from 1,711 to 3,163.
FINRA is a non-governmental regulatory body that handles the resolution of disputes between investors and stockbrokers and other financial firms. It was created in July 2007 as a successor to the National Association of Securities Dealers, to arbitrate stock broker fraud claims that can include charges of breach of contract, breach of fiduciary duty, negligence, misrepresentation, unauthorized trading and other claims that investments were improperly handled.
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Learn MoreInvestor arbitration complaints have spiked since the sub-prime mortgage market collapsed near the end of 2007. Estimates place the number of claims by investors seeking to recover losses on track to top 7,000 this year. By comparison, there were only 4,982 securities fraud arbitration claims filed for the entire year in 2008 and 3,238 filed in 2007.
Not only are there more claims, but more claimants are finding success in their investor arbitration cases, which may be attributable to new SEC rules enacted at the beginning of the year that restricts defendants’ ability to file a motion to dismiss. The rule was designed so that more claimants’ cases would receive hearings on their merits and to prevent defendants from attempting to delay hearings, increasing costs for investors and generally intimidating them out of arbitration.
Through May, FINRA arbitration panels ruled in favor of awarding investors 47% of the time, as opposed to 42% during the same period last year. The most common complaint has been breach of fiduciary duty, which accounted for 1,718 cases through May. A breach of fiduciary duty means that the representative did not act in the best interests of a client.
In the face of an increasing dim view of financial planners by the American public, investment planners asked Congress in April to create a national regulatory body to oversee their industry and create industry-wide standards. Currently, anyone can claim to be a financial planner, and do not need credentials as a Certified Financial Planner.
3 Comments
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laurenceJuly 15, 2009 at 11:25 pm
The data you recite is not accurate. The 85% increase in arbitration filings includes intra industry claims. Finra's data reporting is misleading.
Nicholas J. Guiliano, EsquireJuly 15, 2009 at 11:26 am
The increase in filings or the increase in customer recoveries is certainly not attributable to the Motion to Dismiss temporary moratorium. The increase in cases and customer recoveries is directly attributable to the hundreds of billions of dollars in investor losses caused by fraud in connection with the sale of preferred securities, as if they were fixed income securities, the manufacturing of[Show More]The increase in filings or the increase in customer recoveries is certainly not attributable to the Motion to Dismiss temporary moratorium. The increase in cases and customer recoveries is directly attributable to the hundreds of billions of dollars in investor losses caused by fraud in connection with the sale of preferred securities, as if they were fixed income securities, the manufacturing of structured ducts, corrupt rating agencies, and the desire to outcompete each other in terms of yiellds and performance to attract new investors, by stuffing these products and the balance sheets of American financial institutions with the same subprime debt securities Wall Street created. These are much much different that the tech-wrech cases of 2000 to 2002. These are conservative investors whom suffered substantial losses, and that is why there are more cases, and better cases.
Les GreenbergJuly 14, 2009 at 5:05 pm
Why not mention of the pending Congressional hearings on the proposed Arbitration Fairness Act? For more information on whether securities arbitration before FINRA is fair, etc., see http://www.LGEsquire.com/LG_Links.html .