Anyone Can Indict a Ham Sandwich – or Put a Complaint on an AP’s Record [1]
From where I sit, the reporting of a complaint against an AP is one of the more controversial aspects of the broker-dealer industry. This is chiefly because the standard for reporting a complaint is extremely low. . .
Your Elementary School Teacher Wasn’t Kidding – The Disclosure Goes on the AP’s Permanent Record (CRD)
The consequence of the reporting is significant. . .
Righting the Wrong – Expungement Requires a Court Order
The information in CRD are government records. As a result, FINRA will not expunge information from it absent a court order directing it to do so. . . .
But the Process Generally Starts with an Arbitration Award
The most direct path starts with the panel that is deciding the client’s arbitration claim. . .
Even if the Client Did Not Bring an Arbitration Claim
While the most direct path starts with the panel that decides the claim, APs know that broker-dealers can, and do, deny or otherwise resolve a client claim without it seeing the inside of a hearing room.[9] In that case, the path forward still generally starts with an arbitration panel. However, instead of asking the panel for expungement relief within the context of deciding the client’s claim, the AP files an arbitration claim for the sole purpose of having the panel rule on expungement. The AP can bring this claim against the complaining (often, former) client, but in most cases, it brings the action against the broker-dealer under the FINRA Code of Arbitration Procedure for Industry Disputes. . .
One Can Seek an Expungement Order Without First Obtaining an Award
FINRA Rule 2080 also contemplates the possibility that an AP can obtain expungement relief by going straight to court. APs should be aware that FINRA will likely litigate the matter in the absence of . . .
Protect Your Record
The public interest in information regarding an AP’s history should not mean that they get unfettered access to complaints that are false or clearly inaccurate. APs can, and should, take appropriate measures to see that their BrokerCheck records are accurate. Careful planning is key.
Read more:
- EXAMS’ Risk Alert on Advisers Act Section 204A and the Code of Ethics Rule
- Social Media Hygiene and Recordkeeping
- Defend Yourself
- The MQP
- FINRA’s Expectations (Reg Notice 22-11)
- Cowboy Curly, Mitch and Work-Life Balance
- Finding Balance as a Lawyer, Part 1: Food
- About Ryan
- Resources
Thank you for reading this article. Please know that I wrote it for informational purposes only (some may consider it ADVERTISING MATERIAL) and did not intend for it to be legal advice or to form an attorney-client relationship with you – especially in jurisdictions where I am not licensed to practice law. I encourage you to seek your own counsel to help you with your specific situation. To that end, I invite you to contact me if you would like to discuss my services.
I provide direct and detailed legal and compliance advice for broker-dealers, registered investment advisers and their representatives.
[1] The quote “You can indict a ham sandwich” is generally attributed to former New York Court of Appeals Chief Judge Sol Wachtler. See https://www.wsj.com/articles/indict-a-ham-sandwich-remains-on-the-menu-for-judges-prosecutors-1527863063?st=1aflf4nd6k3q9op&reflink=desktopwebshare_permalink (last visited Apr. 20, 2022).. . .
[9] If resolving a client’s complaint, then APs should also take note of FINRA Rule 2081. This prevents a broker-dealer or an AP from requiring a client to agree to, or at least not to oppose, an expungement request as a condition of settlement. The resolution should be for the resolution’s sake, not as a gateway for expungement.. . .