Brokers Trying to Erase History of Customer Disputes
A system that records all the misdeeds of rogue financial advisors which many investors did not know existed is now being gamed by many of the same brokers it’s meant to expose.
BrokerCheck is a comprehensive database run by securities industry regulatory agency, FINRA. It contains detailed records of every registered broker’s employment history in the securities industry, including customer complaints, terminations, and disciplinary actions. Not that detailed, though…
Unfortunately for investors looking to background check their broker, financial advisors are appealing to FINRA for the purging of key information on these reports in record numbers. This is supposed to be a rare step. It completely erases any trace of misdoing that might have blighted an advisor’s permanent record.
But, according to investor advocacy group, PIABA, arbitrators within the FINRA agency have signed off on 81%-93% of expungement requests made by brokers between 2015 and 2018. That’s almost equivalent to rubber-stamping.
One-Sided Arbitration Hearings Let Brokers Off the Hook
The fundamental problem, according to a recent report by PIABA, is that the expungement hearings are one-sided. There is no one present to oppose the broker’s request for expungement, and little consideration is given to the merits of the underlying cases.
These cases accounted for 1,078 of the 2,044 arbitrations seeking expungement between 2015 and 2018, the report’s authors said. In that four-year period, the filing rate on these types of cases rose 924%.
In the 1,078 “expungement-only” cases at issue, brokers asked to wipe out 2,194 complaints.
Customers objected in about 13% of the expungement requests.
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