Expungement is Often One of the Only Tools Available to Brokers When Their Record is Tarnished by a Firm’s Proprietary Products Failure

In instances where a broker-dealer’s proprietary products fail, the brokers who are tasked with selling those failed products often suffer many customer complaints.  In these situations, the brokers often are given faulty due diligence, research and information by the firm, and sometimes even forced to sell their employing firm’s product with their jobs threatened.  Brokers have sued firms on these types of allegations, including former Morgan Keegan brokers.  A similar situation occurred with the auction rate securities debacle that began in 2008.  More recently, it appears due diligence failures and pressure may have been causes of problems for UBS brokers selling UBS Puerto Rico’s closed-end bond funds, leading to a substantial amount of customer complaints that have tarnished the reputations of many brokers in Puerto Rico.

Brokers with many customer complaints from failed products often have few options for cleaning up their professional record, which is publicly available through the Financial Industry Regulatory Authority’s (FINRA’s) CRD or Brokercheck system.  One of options involves expungement, where the broker initiates a claim against either the broker’s firm or customer requesting that a FINRA arbitration panel “expunge” or remove the customer’s complaint from the broker’s CRD record.  A broker may also claim monetary damages, including damages for defamation for untrue statements that are made on a broker’s U-4 or U-5.

As mentioned in previous posts, once a firm’s product fails and the brokers get too many customer complaints, the employing firm may not want to keep them employed.  It may be very difficult for brokers to obtain jobs elsewhere in the industry because once a broker gets 2 to 3 complaints, they required heightened supervision, something most broker-dealers avoid if possible.

The attorneys at Malecki Law has represented brokers in arbitrations against their employing firms to obtain expungement.  If you have suffered adverse marks to your professional record, either on your U-4, U-5 or CRD report, please contact the attorneys at Malecki Law for a confidential assessment to determine if you can seek expungement or have a claim for damages.