Ex-Man Fights Superhero Battle For FINRA Expungement

The Panel determined that Respondent is subject to FINRA Dispute Resolution's jurisdiction pursuant to the e.Schwab IRA Application executed by Respondent on October 8, 1997. The Panel further determined that Respondent is required to submit to arbitration pursuant to the Code of Arbitration Procedure (the "Code"), and is bound by the determination of the Panel on all issues submitted. 

On December 20, 2013, FINRA Dispute Resolution received Respondent's email advising that Respondent will not be participating in this expungement action.  

[I]n the underlying Arbitration, FINRA arbitration case number 10-02919, giving rise to this expungement request, Dr. Baggarly purchased the Schwab YieldPlus ultra-short term bond fund ("bond fund") in his self-directed SEP-IRA account. Mr. Sharpe was the broker of record on the account and had limited interactions with Dr. Baggarly, according to the testimony of Mr. Sharpe. 

Mr. Sharpe discussed the bond fund with Dr. Baggariy but the purchase in the account was made later and online without any assistance. Furthermore, Jeffrey S. Sharpe was not named as a Respondent in the underlying Arbitration. He is mentioned only once on page 5 of the original Statement of Claim in the underlying Arbitration and not mentioned at all in the Summary of Claim. 

Dr. Baggariy's account was 10 years old and he had a good deal of investment experience according to page 4 of the original Statement of Claim in the underlying Arbitration. On the Schwab IRA account application, Dr. Baggariy states his investment objective as "Growth" while the Statement of Claim in the underlying Arbitration mentions Dr. Baggariy's investment objective as "very conservative." The original Statement of Claim in the underlying Arbitration mentions that Mr. Sharpe "recommended" the bond fund. Under oath during the expungement hearing, Mr. Sharpe testified that he did mention the fund to Dr. Baggarly and they both discussed its merits and risks. According to Mr. Sharpe, Dr. Baggarly ended that conversation with the understanding that he wanted to conduct some more research on his own. This is not refuted and Dr. Baggariy then placed the order online. Dr. Baggarly did not appear for the expungement hearing. 

Involvement under Rule 2080(b)(1)(B) is an objective standard that has been met in this case. The evidence does not support a finding of improper conduct or a securities violation of any kind by Mr. Sharpe. For these reasons, the full panel believes the expungement is warranted. 

Rule 2080(b)(1)(C) 

The Panel found that expungement was additionally warranted under FINRA Rule 2080(b)(1)(C) which provides for expungement relief if "the claim, allegation or information is false." 

The claim is "false" in the sense that the claim in the underlying Arbitration refers to the bond fund and the fund managers and not Mr. Sharpe. The Disclosure Event on Mr. Sharpe's BrokerCheck report states: "Customer Alleges Misrepresentation in connection with the purchase of the Schwab YieldPlus Fund..." And yet the Panel finds that Mr. Sharpe is peripheral to the claim and peripheral to the allegation reported in his CRD record as well. The bond fund and fund managers are referenced in the underlying Arbitration and not Mr. Sharpe. The Panel finds the claim to be false under this standard of Rule 2080. 

• Schwab
• Expungement
• FINRA
• BrokeAndBroker CRD
• Bill SInger