April 14, 2009
I have been a securities arbitration attorney for more than seventeen years. My primary area of practice is bringing claims against brokers and broker-dealers all across the country. Over the years, I have seen outrageous broker conduct that has never made it to the brokers CRDs because the broker was not named in an arbitration or court filing, even though the entire claim related to the brokers misconduct, with the brokers employing broker-dealer as the sole respondent or defendant. There are numerous reasons for only naming the broker-dealer in an action and not naming the broker. Each case is different.
This new rule will correct a huge deficiency in the reporting process for incidents related to broker misconduct. I strongly support it, and believe that the proposed rule will significantly help police the brokerage industry and benefit the public. The public will benefit from being able to more accurately obtain the incidents a broker has been accused of, and regulators will better be able to find bad apples in the broker community and take appropriate disciplinary action.
An example of the type of deficiency that this rule will correct is a current case of mine filed with FINRA against a significant broker-dealer. The broker had made some of the worst misrepresentations about a product, in writing, I had ever seen. The broker had further concentrated all of the clients funds in this one awful product, causing a loss of the great majority of the funds entrusted to the broker and the firm. The client had bitterly complained about what the broker had done, and there were significant e-mails about the clients verbal complaints between the client and the broker-dealer management. I did not include the broker as a respondent, and the broker-dealer took the position that because there was no written complaint, the brokers misconduct did not have to be reported, and was never reported on the CRD system. Even though the broker-dealer very quickly settled the case for a significant percentage of my clients losses, the brokers misconduct will never be reported on his CRDs. That is wrong, and the new rule will correct this problem.