December 27, 2017
The BrokeAndBroker.com Blog's publisher Bill Singer, Esq. takes this last opportunity in the waning days of 2017 to rage against the machine and call for the reform of FINRA's failed expungement system. As Singer notes, the present appellate process by which Wall Street's men and women seek to clear their names is a bastard child no one claims as their own. Public advocates are correct that Wall Street's bygone practice of buying and selling indulgences was a disgrace that needed to be stopped. Similarly, the industry had ample warning of the need to tend to its own mess but chose to do nothing. Consequently, the present expungement process is an angry reaction to a persistent failure to reform. Unfortunately, the ensuing rush to judgment yielded what such angry efforts will: a lack of balance and fairness. For those industry men and women whose good name is besmirched by the mistaken complaint or the erroneous allegation -- no matter how few in number those innocent victims may be -- the relief is little more than a rigid system that takes too long, costs too much, and, in the end, sends the victor on an even more time-consuming and expensive route to the courts.
Case In Point
In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in September 2017, associated person Claimant Mahn sought the expungement of a customer complaint from her Central Registration Depository record ("CRD"). The customer had alleged that she was owed a refund for fees associated with her purchase of municipal bonds; J.P. Morgan stocks; and a Synchrony Bank certificate of deposit. In response to the customer's complaints, Respondent Wells Fargo Clearing Services conducted an internal review and informed the customer that there would be no adjustment or credit. Thereafter, the customer purportedly took no further action and there was no settlement of the matter. Notwithstanding the lack of further customer action, a regulatory disclosure of the complaint was posted on Claimant Mahn's CRD. In the Matter of the FINRA Arbitration Between Rita K. Mahn, Claimant, vs. Wells Fargo Clearing Services, LLC, Respondent (FINRA Arbitration 17-02413, December 2017).
Respondent Wells Fargo did not object to the requested expungement.
The sole FINRA public arbitrator conducted a telephonic hearing at which Respondent Wells Fargo participated but did not contest the requested relief. The customer did not participate or contest.
In recommending expungement, the sole FINRA Arbitrator found that the customer's claim was factually impossible or clearly erroneous, and false. The Arbitrator provide in part the following rationale:
Municipal Bond Transactions
The basis for the Customer complaint and amendment to Claimant's CRD involved three separate transactions. The first transaction concerned the purchase of seven (7) municipal bonds. The Customer complained of a commission charge of $4,848.21. This figure appears on the confirmation for the transaction, but as the net amount of the transaction and not the commission. Accordingly, the Customer's claim of an excessive commission is both clearly erroneous and false.
The Customer also complained of a loss, which appeared on her April 30, 2017 statement, seven (7) months after they were purchased in September 2016. Based on Claimant's notes which are dated contemporaneous with her meetings, Claimant explained the fluctuating nature of bond values and that changes in value do not typically impact the income stream, which was the purpose for buying them. The Customer's claim that the loss in value was a "surprise" is both clearly erroneous and false.
The Customer complained that she was charged a commission of $257.01 and not the $157.00 amount Claimant advised was the commission. A review of the trade confirmation confirms that the "charge/commission" was $157.00. The "257.01" amount appears in the figure stated for the Net Amount of the trade, $15,257.01. Accordingly, her claim that she was charged a commission of $257.01 is both clearly erroneous and false.
Synchronv Bank CD ("CD")
The Customer first complained that the value of the CD was $160,435.65 at the time of transfer. However, the account statement for October 2016 shows that its value was $159,564.00 at the time of transfer. Accordingly, the Customers claim that she suffered a loss at the time of transfer is both clearly erroneous and false.
The Customer also claims she incurred a loss of $5,301.15 when the funds were transferred out of the Wells Fargo account. However, she purchased the CD at a cost of $150,000 and, at the time of transfer, the value of the CD exceeded her cost. Accordingly, her claim that she suffered a loss at the time of transfer is both clearly erroneous and false.
Bill Singer's Comment
Compliments to the sole FINRA arbitrator for a compelling Decision replete with sufficient content and context.
Online FINRA BrokerCheck records as of December 27, 2017, disclose that Mahn is a 24 year veteran and the only disclosure on her record is the aforementioned customer matter under the heading "Customer Disputer - Closed-no Action / Withdrawn / Dismissed /Denied." Wells Fargo indicated that the customer complaint was received on June 1, 2017 and denied on July 20, 2017.
By way of a brief recap, the customer seems not to have understood the various charges and valuations on her confirmations -- which may be the fault of the customer or could just as easily be the fault of Wells Fargo's or J.P. Morgan's presentation of such charges -- and, frankly, could also be the fault of FINRA for not regulating its large member firms in a manner that prompts understandable account statements. Not at fault for such murky presentations of data is the lowly employee Claimant Mahn.
As has been reported in the BrokeAndBroker.com Blog over and over and over again, this is yet another example of FINRA's cumbersome expungement process, which ties up significant resources from the arbitration forum. I find it hard to accept that legitimate public advocacy organizations such as PIABA coupled with Wall Street industry interests cannot work out a better appellate system by which the industry's men and women can legitimately clear their names via a process that is quicker and cheaper. Without question, there are significant and compelling reasons to impose a comprehensive review of all expungement requests. I do not advocate for any dilution of that necessary mandate. The delicate balance that must be preserved in any reform of the expungement process is that public customers cannot be intimidated against making complaints, even if based on confusion or misunderstanding. On the other hand, the industry's men and women should not have to pursue a lengthy appeal and shell out thousands of dollars just to remove falsehoods from their otherwise unblemished record.