Articles Tagged with expungement

Brokerage firms may sometimes use reporting inaccurate negative information on a departing securities employees’ U-5 records as their “weapon” to keep their customers, according to a Bloomberg article. FINRA records and broker experiences show that brokerage firms occasionally include inaccurate information when filing a Form U-5. While financial advisors and brokers can file an arbitration to have employers remove the erroneous information from their record, many take no action. Securities employment attorneys are unsurprised given that broker and financial advisor cases against the employer, tend to favor big brokerage firms heavily. Financial professionals fear the high cost, time loss, and difficulty getting expungement in a FINRA arbitration.

Brokerage firms provide information regarding an existing employee’s termination in a document entitled, Uniform Termination Notice for Securities Industry Registration Notice – Form U-5. Within 30 days of the broker’s termination, the brokerage dealer must file a Form U-5 with the Financial Industry Regulatory Authority pursuant to Article V, Section 3 of the FINRA by-laws. A Form U-5 seeks information pertaining to the circumstances around a respective broker’s termination from the firm. Brokerage firms are obligated to provide accurate, and timely information as well as file any changes on the U5, according to FINRA’s Regulatory Notice 10-39.

It is important to contact a FINRA securities attorney when you first realize that you may be terminated or when you are terminated, to act fast. While a Form U-5 is not “negotiable,” a broker can provide information to the firm to change the firm’s mind on the facts, as well as tell them facts that they may not know. It is worthwhile to try doing so before the filing, as after the filing firms are hesitant to change a U-5 as regulatory agencies could start asking questions regarding the reasoning. No firm wants FINRA regulatory to come knocking on their door.

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.

Brokers can end up with unwarranted customer complaints, arbitrations, terminations, and other adverse disclosures on their CRD for reasons beyond their control. While plenty of investors have a legitimate “beef” against their investment professional, some people vet illegitimate or unwarranted frustrations by filing complaints to a broker’s employer or FINRA and it can stay with a broker and hurt his career forever. Sometimes, the brokerage firm, the market or other external forces are actually at fault for the customers’ losses, not the broker. Some customer complaints could be emotional or financially driven rather than rational. Similarly, firms sometimes have “ulterior motives” in terminating and reporting a termination of an investment professional, which could be false and lead to a FINRA 8210 inquiry, investigation or disciplinary hearing, as well as hurt future employment potential forever.

The CRD, short for Central Registration Depository, is the online registration and licensing system FINRA uses as their database for broker records. Potential customers, regulators, and employers have access to most of the CRD’s information through FINRA’s publicly available online resource, BrokerCheck. Customer disclosures permanently show on the CRD irrespective of a broker’s actual culpability for the alleged misconduct. It can negatively change a broker’s career forever.

Frivolous marks on a Form U5 can damage the stellar reputation any well-intentioned brokers craft after years of successful securities industry experience. Fortunately, in the appropriate circumstances, brokers can have marks removed from the CRD in FINRA arbitration or court proceedings. The experienced expungement attorneys at Malecki Law can help brokers pursue removal of negative customers disclosures FINRA arbitration proceedings. It is more difficult, expensive, and time-consuming for investment professionals to pursue expungement requests in courts with FINRA as an adverse party, but an investment professional can file in court as well.

Today, Ms. Malecki was extensively quoted in the FundFire story titled MSWM Goes to Court to Get Former FA to Pay Back Loans. 

This story is focused on Morgan Stanley’s attempt to go to court to make a former advisor pay-up after FINRA arbitrator granted them a million dollar reward in a promissory note dispute case. Ms. Malecki, who has extensive and relevant experience with securities industry employment dispute cases opined that “it is common for wirehouses to pursue awards through FINRA arbitration when advisors leave the firm but don’t repay outstanding promissory notes” and this happens more often when markets are bad. The detailed story is available on the FundFire website at http://bit.ly/1ZAPssh