NASD Arbitration Statistics – February 2004.

 NASD Arbitration Stats – Feb. 2004 

Close outs exceed filings again, settlements up.


Continuing a reversal in evidence in last month’s statistics (SAA 04-08), close-outs convincingly exceeded new filings at NASD in the second month of 2004. NASD Dispute Resolution has been in a deficit-type mode for the past several years, as new cases coming in numbered several thousand more in total than cases being closed. A trend of that nature will ultimately put strains on turnaround time, staff resources, and service in general.

For a few months in 2003 and with some vigor in 2004, the “deficit” has turned to a “surplus,” as NASD has begun to achieve higher close-out figures. True, some of the difference (17%) between the 1,234 new case submissions through February 2004 and the 1,443 close-outs during that same period is due to a 16% drop in new filings, but there is more termination activity, too. Close-outs are up 27%, compared to last year at this time. There were 726 case terminations recorded in February, a near-record number of close-outs reached only once previously (Oct. ’03 – 843).

It is too early to make much of this welcome shift, because the increase, at least relative to 2003, does not derive from more cases moving through Award. Settlements are up, as are stipulated Awards and other administrative and party withdrawals. Average turnaround time continues to inch upwards, to the extent that all three categories of turnaround time (overall, hearing decisions, and simplified decisions) are all on the rise, to one degree or another. If the “surplus” trend continues, pressure on turnaround time will be naturally relieved. Reflective of the lower filing numbers are the lower numbers on controversy types; not one category reflects increased numbers over last year’s allocations.

The character of the disputes seem to be generally as they were in 2003, as the categories that trailed most during the spurt in cases during 2003 (e.g., churning, unauthorized trading, and online trading) continue to trail by the greatest percentage in 2004 (-37%, -22% and –59%, respectively).

On the money side, the aggregate damages awarded to customers on their compensatory claims in 2003 set a record at $132 million and a near-record for total damages awarded ($162 million) and this year is on a track that will exceed those amounts. $29 million in compensatory awards have been made to customers and, with punitive awards included, the total soars to $36 million. At this rate, damages awarded could easily exceed $200 million by the end of 2004 and that does not account for the 60-70% of the outcomes due to settlements. The $36 million was assessed against industry parties by 164 separate arbitration Panels, 164 “winners” among the 289 customer cases that closed (both hearings & paper) during these past two months. In addition to a historically high average award of almost $220,000, customers are experiencing a “win” rate (57%) that is also on the high side. This is not the late 90’s either, when many of the big Awards sanctioned defunct broker-dealers and schlock houses – easy wins with little likelihood of recovery.

From our quick SCAN of these Awards, we think big wirehouses, regionals, independents and bank affiliates are the primary respondents. (ed: Are complaints to the SEC a leading indicator of how many securities arbitration claims will be filed? Securities Week recently reported that the SEC closed FY2003 (thru 9/03) with a 14% drop in investor complaints (Vol. 31, no. 10, p. 1, 3/8/04). Investors filed 70,574 complaints in FY2003 and are routinely advised about arbitration as a way in which to seek a monetary recovery.) (SAC Ref. No. 04-11-01)

Copyright 2004 Securities Arbitration Commentator, Inc. P.O. Box 112, Maplewood, NJ 07040; t: 973-761-5880 f: 973-761-1504. Materials denoted with a SAC Reference No. (e.g. SAC Ref. No. 99-01-001) are on hand at SAC and may be obtained by calling the Securities Arbitration Commentator, or by email to The Securities Arbitration Commentator is the leading publication for securities arbitration news and information, and maintains the most complete database of arbitration awards availalble anywhere. For more information regarding their services, visit their website at

Nothing herein is intended as legal or financial advice. The law is different in different jurisdictions, and the facts of a particular matter can change the application of the law. Please consult an attorney or your financial advisor before acting upon the information contained in this article. 


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Mark Astarita is a nationally recognized securities attorney, who represents investors, financial professionals and firms in securities litigation, arbitration and regulatory matters, including SEC and FINRA investigations and enforcement proceedings.

He is a partner in the national securities law firm Sallah Astarita & Cox, LLC, and the founder of The Securities Law Home Page -, which was one of the first legal topic sites on the Internet. It went online in 1995 and is updated daily with news, commentary and securities law related links.