Broker arbitration cases soared 43 pct in 2009

NEW YORK Jan 22 (Reuters) - Stock prices soared last year, but not as much as the number of brokerage customer complaints seeking arbitration.

Some 7,137 arbitration cases were filed against U.S. brokers last year, up 43 percent from 2008 and more than doubling the number of cases filed in 2007, according to the Financial Industry Regulatory Authority, which manages the arbitration system.

The volume of complaints -- ranging from misrepresentation and negligence to breach of duty -- comprised the fourth-busiest period for arbitration since 1994, FINRA data showed.

Disputes increased even as stock market indexes rallied from the depths of 2008: the S&P 500 advanced by nearly 25 percent last year.

The largest number of cases involved breach of fiduciary duty, as cases filed soared 48 percent to 4,206 last year.

Technically, brokers are held to a lower standard of directing clients into "suitable" investments. Congress is currently debating whether brokers should be held to the same, higher standard as financial advisers as part of a sweeping regulatory reform package.

Close behind were cases alleging representation, cited in 3,408 complaints, and negligence, found in 3,405 cases. Individual cases can each cite up to four kinds of wrong-doing.

U.S. brokerage customers are by the terms of their account agreement required to take their complaints to three-member panels convened by FINRA and not through the court system.

(Reporting by Joseph A. Giannone; Editing Bernard Orr)