In its ongoing effort to protect the investing public, FINRA published Notice 18-15 which, among other things, compels firms to identify financial advisors that require heightened supervision. Past misconduct - including Customer Disputes, Criminal Matters, Regulatory Actions, and U5 Terminations - are all factors that firms are to consider in identifying advisors needing additional oversight from FINRA. On its face, it all seems very reasonable. Without a doubt the industry wants to rid itself of bad actors.
However, over the course of AdvisorLaw’s 165+ awards during 2017 and thus far in 2018 (which we boast a 91% win rate), we have helped confirm that the bar for a meritless disclosure on a CRD is artificially low. An investor having a bad day can impact a financial advisor’s career for years to come. With this background, FINRA now wants to use the same information as a basis to determine which advisors need additional supervision.
Couple these factors with the new rule regarding the FINRA expungement process set to be promulgated in the near future. Financial advisors with spurious customer dispute or U5 termination disclosures may find themselves singled out as “bad actors” with a much more difficult path to clear their name, but will nonetheless be required to submit to a regime of additional oversight.
What is an honest professional with a negative BrokerCheck disclosures to do? We understand that the advisor is typically caught up in circumstances which were out of their control. AdvisorLaw has handled hundreds of cases ranging from Customer Disputes to Criminal Convictions. And, as already mentioned, we win 91% of the time. Is it still cost-effective to wait and see?
Tad Burton, J.D.
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This blog is our ongoing effort to inform and educate FINRA licensed professionals about the evolving regulatory ecosystem in which we operate.