Will I Win My FINRA Securities Arbitration Claim?

One of the most common questions I receive as a FINRA securities attorney is whether or not a client is likely to prevail at a FINRA arbitration hearing.  My first gut reaction, and the one I tell clients, is honestly I just don’t know.  Most clients are puzzled by this answer because after handling hundreds of arbitration claims one would think I would have a better sense and certainty as to the strength of the case.  However, the answer to whether the client would win at arbitration is not just a function of the strength of the case.

The better way to phrase the question is: What is the likely outcome of my securities case?  That question is more readily answerable.  I tell clients that it has been our experience that approximately 80% of all cases filed will be resolved through settlement or other means sometime prior to hearing.  Recent data released by FINRA supports that approximately 80% of cases never make it to hearing.  According to FINRA, of all arbitrations decided between 2009 and 2013 between 75% and 79% of those claims are resolved either through settlement, withdrawn, or means other than a hearing.

But what of the 20% of cases that do go to hearing?  What are the chances of success at the FINRA arbitration hearing?  The answer to that question is again usually unknowable at the time it’s first asked.  There are so many considerations that go into determining the likelihood of success, many of which are unknown at the outset.  Once of the biggest unknowns at the outset is who the arbitrators will be.

The arbitrators selected to decide client cases are the biggest variable in determining the success or failure of the case at hearing.  Claimants and Respondents counsel, if they can agree on anything, are likely to agree that the range of arbitrator types vary greatly and tremendously influence the ultimate outcome of the case.  Arbitrators range from disinterested to the point of falling asleep, to overtly hostile to claims, people, or topics, to extremely inquisitive and can actually commandeer a witness on the stand with dozens of their own questions.  As you can imagine, which one of these characters shows up on your panel can have enormous influence on the cases’ outcome.

Perhaps the best way to think about the possibility of winning a client’s claim is thinking about trying the same case before 10 different panels and determining how many of the ten you think you would be successful with.  One panel may award you everything plus attorney’s fees, costs, and punitive damages.  One panel may award nothing.  The rest may award something in between these extremes.  It is the likelihood of what the “average” panel would do that should be focused on and pray that your panel is not an outlier that cannot be quantified.

FINRA’s recent data supports this view and shows that on average only 43% of claims brought end in the customer receiving any award.  Thus, according to FINRA, on average, only 4.3 of those 10 panels will award any damages.  However, a client’s claim may be considerably stronger than the average claim heard by all panels but it is instructive to know what the average cases’ chances of success are.

Each case is highly individualistic and often contains its own variables, strengths, and weaknesses that must be considered in conjunction with the average result.  This article is only intended to provide a general sense of success and failure from publicly available information and my own experience.  Hopefully, I have been able to explain why the question of whether or not your claim is likely to succeed at an arbitration hearing is not one that can be quickly and accurately answered during an initial meeting.

If you would like a consultation to discuss your own individual case please contact our firm.  All inquiries are confidential.

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