For individual investors who have lost money due to account churning, unsuitable investment advice, overconcentration and other forms of investment fraud, filing for arbitration with the Financial Industry Regulatory Authority (FINRA) is the primary means of recovering fraudulent investment losses. Recently, FINRA published a Discussion Paper which highlights some noteworthy statistics about successful arbitration claims and individual investors’ financial recoveries.
Recovering Investment Losses through FINRA Arbitration
The Discussion Paper includes statistics based on arbitration claims filed from 2012 through 2016. According to FINRA, 69 percent of all arbitration claims filed during this five-year period resulted in settlements prior to the rendering of a final arbitration decision. Of the 18 percent of cases that were resolved by decision (13 percent of cases were withdrawn or “closed by other means”), seven percent resulted in awarded damages while 11 percent were resolved in favor of the broker or investment advisor.
Roughly speaking, approximately 80 percent of individual investors who are awarded damages actually receive payment. Specific numbers fluctuate on an annual basis; but, in 2016, of the 202 awards issued, 158 (78 percent) resulted in payment of compensation. However, in 2016, individual investors recovered approximately 90 percent of the damages awarded. This suggests that it is smaller awards that are less likely to be paid.
Smaller firms are less likely to pay investors’ damage awards as well. According to FINRA’s data, the median size of firms with unpaid arbitration awards was just 30 registered brokers. The Discussion Paper also notes that not all unpaid awards reflect circumstances in which investors were left uncompensated: “In recent years, a significant number of unpaid customer arbitration awards have involved a pre-award settlement with one or more firms or individuals involved in the dispute.” In fact, of the $14 million in “unpaid customer arbitration awards” from 2016, investors recovered $6 million through pre-award settlements.
Overall, 2,457 investors filed arbitration claims with FINRA in 2016. This is a staggering number, and it reflects just how important it is for individual investors to be aware of the warning signs of investment advisor and stock broker fraud.
Should You File for FINRA Arbitration?
If you have suffered sudden and unexpected losses in your investment portfolio, you should speak with an attorney about filing for FINRA arbitration. As a general rule, the sooner you take action, the greater your chances are of recovering your fraudulent investment losses. As an individual investor, it is not always easy to tell if your losses are fraudulent. An experienced FINRA arbitration attorney will be able to review your account records and determine if you have a claim for financial recovery. Learn more in our Securities Arbitration FAQs.
Schedule a Free Initial Consultation at Zamansky, LLC
If you are concerned about investment advisor or stock broker fraud, we encourage you to contact us for a free, no-obligation consultation. We handle all cases on a contingency-fee basis, which means that you pay nothing unless we help you recover your fraudulent investment losses. To speak with one of our experienced FINRA attorneys in confidence, please call (646) 663-5628 or get in touch online today.