FINRA Arbitration in 2026 (So Far): Rising Claims, Lasting Consequences

Periodically each year, FINRA publishes statistics on the types of arbitration claims that have been filed, adjudicated or otherwise resolved; the products at issue; and the legal theories most commonly asserted. Those statistics help identify where scrutiny is developing, areas for potential prophylactic measures, and how firms and advisors should respond when a complaint or claim arises.

Through September, FINRA reported 2,010 arbitration filings, up 7% year over year. Customer cases increased 16% to 1,394; intra-industry filings fell 9% to 616, while FINRA closed 1,938 cases. Market volatility may be partially to blame for the uptick: when the tide goes out, you find out who has been swimming naked.

The increase in customer filings gives firms reason to examine how they assess complaints before a statement of claim arrives. A well-supported response begins with an understanding of the account(s) and recommendation(s) at issue, as well as the customer’s actual losses. Counsel should test the claimant’s account against contemporaneous records before adopting the investor client’s narrative. That work also helps distinguish a claim warranting an early business resolution from one that should be defended, potentially through final hearings.

Common stock led product categories with 334 customer cases, followed by private equities (152), options (113), mutual funds (110) and REITs (101). Private equities rose from 88 a year earlier. Structured products reached 65, while cryptocurrency, a growing product, reached 44 cases.

Private investment disputes call for particular attention to the record of due diligence and the basis for the recommendation. Subscription documents matter, but the defense should also explain what the representative understood about the investment and why it fit the customer’s circumstances when recommended. Where liquidity or valuation becomes contentious, counsel should reconstruct what was known at the time and distinguish that evidence from hindsight.

The same applies to more familiar investments. In an options case, trading authority and the customer’s experience may require close examination. In a common stock dispute, concentration and the timing of purchases or withdrawals may drive the damages analysis. Effective securities arbitration defense requires command of those details. A general description of market conditions rarely answers the specific allegations in an account-level dispute.

Negligence, breach of fiduciary duty and failure to supervise led customer controversy categories. Regulation Best Interest allegations appeared in 445 cases as well.

For member firms, those allegations make the supervisory record an essential part of the defense. Counsel should determine what the firm reviewed, how exceptions were addressed and whether the relevant records support the witnesses’ explanations. Written procedures provide context, but the defense must account for what actually occurred. Any asserted legal duty also requires careful analysis of the relationship and the particular conduct alleged.

A firm and its representative may initially appear to share the same interests; indeed, they may remain aligned throughout the dispute. That assumption deserves examination when a customer attacks both the recommendation and the firm’s supervision. Early attention to potential conflicts allows each respondent to make informed decisions about representation and strategy before testimony or settlement discussions expose a disagreement.

Intra-industry compensation cases served increased to 87 from 53; wrongful termination cases rose to 82 from 43. Form U5 libel or slander cases reached 74.

For financial advisors, a dispute with a current or former firm requires its own assessment. Counsel should examine the employment and compensation agreements alongside the communications surrounding the departure. A promissory note demand may involve questions quite different from those raised by disputed termination disclosures. The advisor’s objective should guide the strategy, whether that objective concerns compensation, repayment exposure or the ability to continue a career without an inaccurate account of the departure going unanswered.

FINRA reported 43% of arbitration closures through direct settlement and 12% through mediation; arbitrators decided 21%. Separately, 82% of closed FINRA mediations settled.

Settlement deserves consideration as part of a deliberate defense strategy. Meaningful negotiations require more than an estimate of hearing costs. Counsel should understand the evidence that supports liability, the weaknesses in the damages demand and the consequences of proposed settlement terms for each respondent. A firm may evaluate a payment differently from an advisor whose principal concern involves professional reputation. Those differences should be addressed before the parties enter mediation.

So far this year, for cases that did not settle and proceeded to hearings, customers received damages in 24% of decided customer cases, although an award of damages does not mean the claimant received everything they requested. In other words, even if a claimant recovered only a fraction of their damages, that award counts towards the 24% “win” rate.

For FINRA member firms and registered persons facing a claim, the choice of counsel should turn on the work the dispute requires: understanding the securities business, developing the evidentiary record and presenting a persuasive defense. Our FINRA arbitration practice helps firms and financial professionals assess their positions, pursue appropriate resolutions and prepare contested matters for hearing. If a customer complaint or industry dispute threatens your business or career, contact our securities arbitration attorneys to discuss a strategy suited to the matter.

Shustak Reynolds & Partners, P.C. focuses its practice on securities and financial services law and complex business disputes.
We represent advisors, financial professionals, broker-dealers, registered representatives, investors and businesses.
Attorney George C. Miller can be reached in the firm’s San Diego office at (619) 696-9500.