New Arbitration Study: Home Court Advantage Still Worth Six Points on the Boards
A new study reported today in On Wall Street confirms what the data on the NASD website has always indicated, that the whole process is tilted toward the brokerages, especially the largest ones. The study reports:
Investors who take on the largest brokerages for big claims — $250,000 or more — recover just 10% to 12% of the amounts for which they ask. For claims of less than $10,000, however, they recovered 30% on average. Against the industry as a whole, the recovery percentage was 34%. For all firms receiving claims greater than $250,000, investors’ recovery percentage was 20%.
According to reporter Tony Chapelle, the study also indicated that in customer claims against the major wirehouses, the customer only wins 38% of the time. That is not surprising given the quality of counsel the major wirehouses can afford, their ongoing influence with panelists they see often, and the sophisitication of inhouse counsel.
What does this mean for registered representatives? It means that things are NOT much better in employment disputes regarding commissions, forfeitures, and similar disputes. It means that arbitration does what it is supposed to do, which is to control the liabilities of the houses, and it means that arbitrators are statistically predictable in their decision making, even if not in every single case.
While I have been able to beat these numbers in my cases, I have often considered that to be more because of the integrity of arbitrators in individual cases rather than trial skills. Nevertheless, any decisional system that favors one side or the other so predictably over time is most assuredly skewed. It should be noted that the numbers shoot up against the smaller houses compared to the major wirehouses.
