FINRA Arbitration Panel Awards Malecki Law Broker Clients 28 Customer Complaint Expungements

Malecki Law is pleased to announce that a FINRA arbitration panel granted 28 expungements for three broker clients with customer complaints from their sale of Puerto Rican closed-end funds. The 28 expungements were granted as part of a FINRA arbitration award, the claim filed on behalf of nine Puerto Rico brokers against UBS; only three sought expungements. This winning result for our UBS Puerto Rico broker expungement case was detailed in an unusually long 40-page Award posted to the FINRA Dispute Resolution Portal yesterday.

Malecki Law filed this case in July 2015 and worked through the completion of discovery with a local PR lawyer, Benjamin Quinones Lebron Esq. before also teaming up with Harris, St. Laurent & Chaudhry LLP to try the numerous witness case in Puerto Rico. The FINRA arbitration claim filed on behalf of nine brokers, sought $30 million plus fees in addition to expungement. The monetary portion of the arbitration claim was resolved to the satisfaction of all parties. Only three of the nine brokers chose to move forward with expungement claims after the monetary portion was resolved.

The majority-public panel issued the award after considerable deliberation regarding the merits of the brokers’ request. In fact, the FINRA arbitration panel had a week of hearings, a time frame longer than usual. FINRA considers expungement to be an “extraordinary remedy” that should only be recommended in certain situations that do not compromise investor protection.

It is important to note that neither the involved customers nor UBS opposed the broker claimants’ expungement request. All the customers received notice of the hearing and an opportunity to appear or make a submission. Most customers did not oppose, with many even supporting expungement for the brokers. Notably, as detailed on page 33 of the Award, the sole customer that did appear initially opposed expungement, but “flipped” and changed his position to support the expungement after learning more of the facts.

When considering whether to grant expungement for the brokers, the arbitrators were required to refer to the Code of Arbitration Procedure Rules 12805, 13805 and FINRA Rule 2080. The panel must have a hearing session, review settlement documents and render a decision based on at least one of three standards to grant expungement of customer dispute information. The criteria for granting expungement, are the following set forth by FINRA Rule 2080:

“(A) the claim, allegation or information is factually impossible or clearly erroneous;

(B) the registered person was not involved in the alleged investment-related sales practice     violation, forgery, theft, misappropriation or conversion of funds; or

(C) the claim, allegation or information is false.”

When the closed-ended fund product collapsed, the UBS brokers, many of whom solicited their family members and bought the funds themselves, were left distraught with customer complaints and marks on their record. Customer complaints and other adverse disclosures on a CRD can permanently destroy a broker’s career. Fortunately, FINRA rules provide such brokers with the opportunity to remove such damaging records through expungement proceedings. The FINRA arbitration panel granted expungement for 28 out of the 30 customer complaints requested for the three brokers.

Even the most careful brokers can end up with customer complaints on their record arising from circumstances not within their control. Sometimes, brokers will receive a customer complaint for selling a product after receiving false information or high pressure from their broker-dealer. Alternatively, a disclosure on a broker’s record could have arisen from false or even frivolous customer complaint.

Our securities attorneys believe that it is an injustice for an innocent broker to have a negative disclosure for a groundless complaint tarnishing their record. If you are a broker with unwarranted customer complaints on your BrokerCheck/CRD records, contact our securities industry expungement attorneys for a free consultation today. Malecki Law securities attorneys have substantial experience with helping brokers expunge unjustly placed disclosures from their CRDs and BrokerCheck records.