by Brian Mahany
We have long been a fan of BrokerCheck, the free web based database that allows the public to see what type of complaint and disciplinary history their broker has. To be sure, the system has some flaws but it is still a great way to perform your own due diligence on stockbrokers. BrokerCheck is operated by the FInancial Industry Regulatory Authority (FINRA) and can be accessed by anyone. No sign up, no passwords and most important, no fees.
A recent California appeals court decision now makes it easier for bad brokers to expunge customer complaints and disciplinary history from their record. That means customers can no longer be sure whether or not their broker has a clean record.
With fraud rampant in the financial world, allowing stockbrokers to delete derogatory information makes absolutely no sense to us. We are not alone, both FINRA and the Public Investors Arbitration Bar Association decried the decision.
The case in California was brought by a stockbroker with 17 customer complaints and a regulatory action on his records. He asked a court to order FINRA to clear his record because 13 of the 17 complaints involved the same security and because his record had remained clear for approximately 5 years. The trial judge agreed with FINRA and said no. Unfortunately, an appeals court in San Francisco reversed the trial court judge and sent the matter back for a full hearing.
We feel that investors should know exactly how many complaints a broker has. At some point in their career, even the best brokers sometimes receive a complaint. A potential investor might be willing to overlook one or two complaints but become quite concerned if the person asking for their hard earned money has say 17 complaints.
The dates of the complaint and time between complaints is also relevant. If you were hiring a baby sitter for your children, you probably want to know if the babysitter is a pedophile and registered sex offender,even if their conviction was 6 years old.
We hope the flood gates are not opened and that bad brokers are not able to now simply expunge their records. Hopefully this decision is isolated to the San Francisco bay area and is not widely adopted. People should have a right to learn of their broker’s record before they invest.
The asset recovery and fraud lawyers at Mahany & Ertl help investors get back their hard earned money. While no stockbroker or investment advisor can guarantee that you will always make money, they are required to understand your financial needs, make suitable investment recommendations and understand the products they are selling to you. Registered investment advisors have an even higher duty to you. If you lost money because of an unsuitable investment or bad advise, give us a call.
For more information, contact attorney Brian Mahany at or directly at (414) 704-6731. All calls are protected by the attorney – client privilege and kept strictly confidential.
Mahany & Ertl – America’s Fraud Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine & Minneapolis, Minnesota. Legal services available in many locations.