Financial Institutions Law Alert

In-person FINRA arbitrations have now been on hold for almost eight months.  FINRA has already announced that the postponements will continue through January 31, 2021, and further postponements appear likely.

In early September, we published an analysis of the early virtual hearing results.  Our key findings at that time were:

  • Almost 2/3rds of cases in which a virtual hearing had begun resulted in a settlement;
  • Just 7 cases had reached an award following a virtual hearing, with only 3 of those cases involving fully virtual hearings.
  • The fully virtual hearings were all completed in 3 days or less; and
  • All 7 virtual hearings resulted in compensatory damages being awarded to the claimant, with 3 of the decisions also awarding attorneys’ fees, sanctions, and/or punitive damages.

After a lull, a wave of virtual awards has been issued in recent weeks.  While just 2 awards were issued between August 18 and October 8, the past six weeks (October 9 – November 20) have seen the release of 15 virtual awards (10 customer and 5 industry).  In October alone, the total count of virtual hearing awards more than doubled from 10 to 21. 

In many respects, the 15 virtual awards issued in the past few weeks have varied significantly from the early virtual awards.  The starkest difference lies in the results.  While all 7 of the early decisions awarded damages to the claimant, 13 of the 15 recent awards have resulted in a complete denial of the claimants’ claims (9 of the 10 customer claims and 4 of the 5 industry claims).1

In addition, the 15 recent cases have included some longer hearings, suggesting more witnesses and more documents than previously seen in virtual hearings.  Of the 15 recent awards, 7 involved eight or more days of virtual hearings, including 3 hearings that spanned fourteen or more virtual days (with the longest reaching sixteen virtual hearing days). 

The recent cases are not entirely different from the early cases, however.  In particular, a significant percentage of cases still appear to settle after the final hearing has begun.  As of the end of September, 60 cases had conducted at least one final hearing session via Zoom.  See  Today, more than seven weeks later, awards have been issued in less than half of those cases.  While some awards could still be outstanding among the group of 60,2 it appears that around 50% of cases are settling after the virtual hearing has begun.  As noted previously, experience suggests that the typical settlement rate for parties who have already invested the time and expense of preparing for and commencing a final hearing is around 5%-10%.

Another persistent trend relates to the age of the cases.  Cases that proceed to a virtual hearing tend to be older, with almost half having been postponed prior to the pandemic.  The average time from the filing of the Statement of Claim through a final virtual hearing is approximately 27 months – almost a year longer than the average time for a case proceeding to a final hearing in recent years.  See

Finally, whether to proceed virtually continues to be hotly contested.  None of the recent awards reflect that the parties consented to proceed virtually, while 4 state that one party had objected and been ordered to proceed virtually.3 As of the end of October, motions to proceed virtually had been challenged 86% of the time in customer cases (up from 80% as of August 18).  See  Arbitrators had also ordered an objecting party to proceed virtually 71% of the time in customer cases (down from 76% as of August 18).  Id.

1 The lone customer cases that resulted in damages involved a non-member Respondent that had recommended inverse and leveraged ETFs.  

2 Under FINRA Rule 12904, arbitrators should “endeavor” to issue awards within 30 days of the conclusion of the hearing.

3 The remaining 11 recent awards do not specify whether the parties agreed to proceed virtually.  Of the first 7 virtual awards, the award reflected whether or not the parties had agreed to proceed virtually in every case (5 agreements and 2 in which one party objected).


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