Welcome to Financial Advisor IQ
Follow

Why Finra Expungement Petitions Are Skyrocketing

August 1, 2017

Twice as many brokers are seeking the expungement of customer complaints from their disciplinary records this year as investors are increasingly aware of Finra’s BrokerCheck, Financial Advisor magazine writes.

Finra arbitrators have concluded 95 expungement cases through July 27, compared to the 42 cases concluded during the same time frame last year, according to the publication.

And brokers won the “vast majority” of these cases, Financial Advisor magazine writes. That’s because customers and brokerage firms frequently don’t object to the expungements, although brokers must make a good faith effort to contact them, according to the publication.

Dochtor Kennedy, managing attorney at AdvisorLaw LLC who’s concluded 30 expungement cases this year, tells Financial Advisor magazine that many investors hold a good opinion of a broker despite having complained about a certain investment. And brokers typically seek an expungement alone, without asking for damages, according to the publication.

Lawyers tell Financial Advisor magazine that the jump in expungement requests is due to Finra’s active marketing of BrokerCheck, as well as a requirement instituted last year for brokers to link to BrokerCheck on company and advisor websites. Furthermore, while complaints settled for “nuisance amounts” and those that weren’t adjudicated are typically removed from BrokerCheck after two years, Finra has made even these complaints part of the permanent record since 2015, Financial Advisor magazine writes.

Meanwhile, some brokers have racked up meritless complaints, David Robbins, a partner at the law firm of Kaufmann Gildin Robbins & Oppenheim LLP who occasionally represents brokers in expungement cases, tells the publication. As a result, lawyers tell Financial Advisor magazine that the number of such requests isn’t likely to fall anytime soon.

By Alex Padalka
  • To read the Financial Advisor Magazine article cited in this story, click here.