Increasing Number Of Brokers Getting Complaints Expunged From Record

Jul 8, 2013

According to a report from The New York Times, the frequency with which brokers are getting complaints expunged from their disciplinary record is increasing. The growing number of expungements could correlate to the growing number of reported complaints, since 2009 when FINRA began requiring all complaints to be reported on a broker’s record, even if he or she was not named as a respondent. With the application known as “BrokerCheck” on FINRA’s website, investors can review a broker’s employment history and disciplinary record. BrokerCheck is a resource to help investors when choosing to do business with a particular firm or individual. However, BrokerCheck does not always provide a complete disciplinary history because many arbitration panels have been expunging disputes from brokers’ records. For an example, a broker for Wells Fargo, Michele Kief had nine disputes on her record, all of which were expunged from her record by a FINRA arbitration panel. The expunged disputes included a claim by a client which settled for $125,000.

In order to get something expunged, FINRA has created a lengthy process that the broker must go through, which could take years. FINRA wants to protect investors, but investors may not be seeing all the red flags on a broker’s record because of the possible expungement. Brokers may offer to settle a customer’s claim for a greater amount than he or she would otherwise offer in exchange for the costumer’s agreement not to contest an expungement. Critics argue that arbitrators should look further into the substance of the complaint when parties have reached a confidential settlement agreement in determining if an expungement is appropriate.

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