Tags: brokers | FINRA | records | brokerage

NYT: Dirty Brokers Wiping Their Records Clean at FINRA

By    |   Thursday, 13 June 2013 08:26 AM

Investors trying to vet a securities broker often are advised to check the online database BrokerCheck to see if there are any regulatory complaints against the broker.

But brokers with plenty of complaints against them are convincing BrokerCheck's parent, the Financial Industry Regulatory Authority (FINRA), to wipe out at least some of the complaints, The New York Times reports.

It cites an example of one securities executive who had eight complaints erased by FINRA arbitrators, even though he was banned from the securities industry and forced to pay $325,000 in penalties and forfeited profits as part of a settlement with the Securities and Exchange Commission.

Editor’s Note:
Put the World’s Top Financial Minds to Work for You


"People are starting to use BrokerCheck the way they use TripAdvisor," Seth Lipner, a business law professor at Baruch College who represents investors in cases against brokers, told The Times. "No broker wants these red flags on their record."

He and other investor advocates say too many crooked brokers are getting their records spruced up.

According to Melanie Senter Lubin, the Maryland securities commissioner and chairwoman of the broker records steering committee for the North American Securities Administrators Association, state regulators received 519 requests from brokers last year asking to go forward with a panel's recommendation for expungement. In 2009, the number was only 110.

Typically, when a customer opens a brokerage account at a firm, they give up the write to sue the firm and must agree to arbitration. Last year, 4,200 new arbitration cases were filed.

Brokerage firm customers can't sue for wrongdoing, making the information available on BrokerCheck all the more important to them.

Meanwhile, government investigations of insider trading are multiplying like mushrooms. So how to cut down on that scourge?

"Insider trading is, by definition, based on information that is not known to investors," Baruch Lev, a professor of accounting and finance at New York University, told The New Yorker. "If you increase [corporate] transparency, the gains for insider trading must go down."

Editor’s Note: Put the World’s Top Financial Minds to Work for You

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Investors trying to vet a securities broker often are advised to check the online database BrokerCheck to see if there are any regulatory complaints against the broker.
brokers,FINRA,records,brokerage
347
2013-26-13
Thursday, 13 June 2013 08:26 AM
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