A California Appeals court has made a decision which could impact all brokers who have records. They have set precedent which may allow those brokers with records an easier manner of expunging them. The current system allows for an arbitration process through FINRA to occur, whereby a broker presents his case to the panel, which then decides whether or not to grant the expungement. The expungement is usually only occurs when the information on the record is somehow incorrect or false.
The case was brought by Mike Lickiss, who is a broker operating in California. He is claiming that his record misrepresents him, since the complaints listed in the early 1990s for a REIT failure were a result of the market collapsing. He argues that he has since had no problems, although he was involved in a selling away complaint. The decision by the judge would, according to Reuters, “let a judge invoke unusually broad authority in deciding whether to erase details about more than a dozen arbitration complaints from Lickiss’ record, all based on what a court decides is simply the fair thing to do”. Furthermore, the ruling would mean that judges would not have to follow any of the already established guideline from FINRA. Judges may be unaware of the complexities of the harm that went to investors who filed complaints against their former brokers, which could lead to decisions that are detrimental to the community as a whole.
The issue of expungement is one of many which have now begun to surface as FINRA has begun to make public more information about brokers. The industry system for reporting on brokers, BrokerCheck, already shows information regarding customer allegations, arbitrations and regulatory actions towards brokers. Since 2010, FINRA has also disclosed all historical complaints, regardless of the age or whether they were proven. All of this probably means that the issues being brought forward by Mr. Lickiss claims will remain relevant regardless of how the court rules in the end.