Is Retail Securities Arbitration Dying?
Most people that engaged a financial advisor employed by a FINRA (formerly NASD) broker-dealer and all registered representatives signed something containing a mandatory arbitration clause. FINRA announced that for 2007, new arbitration case filings dropped to their lowest level since 1992. That is a staggering concession.
While some political forces have been trying literally forever to abolish or curtail arbitration, arbitration itself may be doing what political power could not do.
I have been handling securities industry arbitrations since 1988 and I have represented broker-dealers, registered representatives, and customers, although few of the latter, and I thought 2007 was a busy year. It seems, however, it was less busy than I realized.
The three years of lesser activity at FINRA Dispute Resolution, 1992, 1998 and 2006, averaged 4,644 case filings annually. 2007 was 70% of that average; 30% below the average of the lowest filing years prior to 2007.
It will be interesting to see if the industry credits one or more allegations of: good returns of 2007, good compliance initiatives, or something else. Could it be that the legal community has figured it out and has revised upward the criteria for case selection to offset the fact that it is a high risk forum?
