Investors filing claims of misrepresentation, churning, omission of facts, failure to supervise and stockbroker fraud are growing in number. According to the latest statistics released by the Financial Regulatory Authority (FINRA), new case filings through June 2009 were 3,875, compared to 2,129 cases in same period of 2008 and 1,656 in 2007.
The type of controversy most frequently cited in FINRA’s June 2009 statistics was breach of fiduciary duty, followed by misrepresentation and negligence. In comparison to 2008, the breakdown is as follows:
- Margin calls: 64 in 2008; 128 in June 2009.
- Churning: 212 in 2008; 206 in June 2009.
- Unauthorized trading: 248 in 2008; 440 in June 2009.
- Failure to supervise: 1,029 in 2008; 2,552 in June 2009.
- Negligence: 1,602 in 2008; 3,404 in June 2009.
- Omission of facts: 1,201 in 2008; 2,436 in June 2009.
- Breach of fiduciary duty: 2,836 in 2008; 4,432 in June 2009.
- Unsuitability: 1,181 in 2008; 2,508 in June 2009.
- Misrepresentation: 2,005 in 2008; 3,530 in June 2009.
In addition to an influx of new arbitration claims filed, more investors are coming up victorious. Through June 2009, FINRA arbitration panels ruled in favor of investors 46% of the time, compared to 42% for the same period in 2008.
The continued surge of arbitration claims is attributed to several factors, including the ongoing turmoil in the nation’s financial markets. Other reasons concern specific investment products such as variable annuities and credit derivatives. A proliferation of several high-profile Ponzi schemes and other investment frauds also has spurred a rise in claims by investors.