FINRA Says Number of Stockbroker Fraud Arbitration Claims by Plaintiffs is Rising

According to the Financial Industry Regulatory Authority, the amount of investor fraud claims alleging securities fraud and other violations has grown. From January to May 2009, investors filed 3,163 stockbroker fraud claims-an 85% increase from the 1,711 stockbroker fraud arbitration claims that were filed for the same period in 2008.

More investors have filed arbitration complaints since the demise of the sub-prime mortgage market in 2007. About 7,000 investment fraud claims are expected to be filed in 2009-compare this figure to the 4,982 arbitration claims in 2007 and the 2,238 securities fraud arbitration claims in 2007. In 1,718 of the arbitration cases filed through May 2009, breach of fiduciary was the most common complaint.

Also, more investors with arbitration claims are emerging victorious. This may be in part due to new rules by the Securities and Exchange Commission that limits a defendant’s ability to file a dismissal motion. For the first five months of this year, arbitration panels issued rulings in favor of investors in 47% of arbitration claims-compared to 42% of the time during the same time period in 2008.

However, Shepherd Smith Edwards & Kantas LTD LLP founder and Stockbroker Fraud Attorney William Shepherd says, “Considering there are about 60 million investors in the U.S., it is actually surprising that so few seek recovery. Approximately 1 in 10,000 investors file claims, but I believe at least 1 in 1,000 investors is cheated. Thus, 90% of valid claims are never filed. Claims involving money lost gambling in the market or over honest but bad advice do not succeed. Valid claims include those for fraud, misrepresentation, unsuitable investments, failure to disclose risks, or even for negligence.”

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Investor Arbitration Claims Sharply Up,

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