Blog by Bill Singer WEEK IN REVIEW

April 1, 2017

Did you notice?  Did you feel the tremor in the Force? How did Obi-Wan Kenobi put it? Oh yes, I remember: I felt a great disturbance in the Force as if millions of voices suddenly cried out in terror and were suddenly silenced. I fear something terrible has happened. Indeed, something terrible did happen. Thankfully, both Wells Fargo and the Financial Industry Regulatory Authority were there to protect us. READ

After 35 years on Wall Street, I'd like to say that I've seen it all; however,  I'm wise enough to know that everyday will bring something new. During my career prosecuting and defending the biz, I've handled cases involving fistfights, throwing of heavy objects, office feuds, office vendettas, nastygrams, obscene emails, racist and sexist notes left around the office, and an inventive range of comments about someone's mother and lack of good looks. The supply of such nonsense seems endless. The lengths to which some folks will go to get even or get back are immeasurable. Unfortunately, what initially strikes us as entertaining may prove frightening. What initially horrifies us may, at times, mellow into something sad, if not pathetic. In that spirit, let's consider today's featured regulatory case. READ

This is the second installment of Bill Singer, Esq's analysis of FINRA's expungement rules. If you opt to pursue an expungement of customer-dispute information from the Central Registration Depository ("CRD"), you have two pathways: seeking an expungement recommendation from a FINRA arbitration panel; or directly petitioning the courts. Let's consider the steps you would take upon those separate avenues of relief.

Few issues appear more frequently on the regulatory docket of the Financial Industry Regulatory Authority than allegations about a registered representative's failure to timely disclose tax liens. In recent years, the Blog has criticized the self-regulatory organization's seemingly inconsistent findings -- at times, bordering on arbitrary and capricious -- that respondents have willfully failed to disclose their liens. Although the Blog's publisher Bill Singer, Esq. readily concedes that the majority of such disclosure failures are likely willful, he remains adamant that FINRA must be meticulous in explaining why apparently similar fact-patterns produce disparate labels of willful and non-willful disclosure. Given that the finding of willful non-disclosure renders respondents "statutorily disqualified" from securities industry employment, FINRA has an obligation when settling or adjudicating these cases to provide concise definitions and explanations, pursue consistency in its charges, and ensure fairness in its sanctions. As today's featured cases demonstrate, FINRA is still falling short when discharging its mandate. READ

To say that we live in a litigious age is something of an understatement. That being said, as a lawyer, who the hell am I to complain about more business? Frankly, it's an ill lawsuit that blows no good for the legal profession. On Wall Street, litigation winds often take the form of typhoons and tornadoes, whose devastation last long after their winds have died down. Whether fairly named for fraud or victimized by disgruntled customers, securities industry employees find that once customer-dispute information is entered into the Central Registration Depository, its half-life challenges that of any radioactive isotope. Customers' allegations, complaints, settlements, and verdicts literally follow associated persons to the grave.

At one time, the industry had a fairly simple grievance process, which scrubbed clean a given employee's record. The problem with that approach is that a lot of recidivists got to reinvent themselves and cause ongoing damage to unsuspecting customers. After all, a dirty-record wiped clean and an unblemished record look the same if you don't know the difference. As the horror tales mounted about scamsters with sanitized histories who went on to dupe unsuspecting consumers, pressure mounted to deprive the old National Association of Securities Dealers ("NASD") and its successor the Financial Industry Regulatory Authority ("FINRA") of the right to take a squeegee to an associated person's record.  As with so many reforms that occur as a "reaction" to perceived abuse, the result didn't necessarily produce a fair set of new rules and regulations. Understandably, investor advocates shed no tears for halting what they viewed as an outrageous anti-consumer abuse by NASD/FINRA. What is now on the books is far more protective of investors and far more onerous for industry participants.  

How then do associated persons expunge customer information from their industry records? As you may imagine from the preface to this article, it's not a simple process -- and when a regulator does not provide for a simple solution, that also means that the remedy can prove expensive and time-consuming. Welcome to the world of seeking a FINRA expungement. NOTE: This article is the first installment on the issue; more to follow. READ