The mortgage meltdown, and the ensuing financial crisis has resulted in a wave of new FINRA arbitrations by investors against their brokers and financial advisors. Although it is easier to track new securities class action filings arising out of the financial crisis, FINRA arbitrations are much harder to follow.
However, a recent Associated Press article (here) sheds light upon the huge increase in new FINRA filings. In 2008, new arbitration filings with FINRA increased by 54% over 2007 (which I suspect were also higher than 2006) to 4,982. Much of these are no-doubt directly related to the subprime lending and the credit crisis; many are the result of the Madoff scandal, the Stanford fraud, and the significant general decline in the stock market.
FINRA recently reached a significant decision in a case directly related to the credit crisis. In that case, the agency awarded over $400 million to an investor in Auction Rate Securities, who lost money when the ARS market froze up in February 2008. The award included compensatory damages, interest and $3 million in attorneys' fees. The investor, a European microchip maker, claimed that its investment advisor caused it to invest in ARS rather than safer federally guaranteed student loan securities it had asked to invest in. An article with more detail about the decision is available here and the award is available through the investor's press release here.
I expect that the volume of FINRA arbitrations and the announcement of other significant decisions will increase again in 2009.
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