FINRA’s Focus on Advisors With Customer Disputes

We’ve known for some time that FINRA ranks their brokers based upon negative disclosures on their Form U4 and CRD.  However, that information has never been released to the public en masse due to instances where many non-adjudicated claims have never actually proven a sales-practice violation by the advisor.  

A firm that represents customers in drumming up these investor complaints, The Securities Litigation & Consulting Group, has recently done their own review of all member firms as it relates to those employing the highest percentage of advisors with customer dispute claims.  The result is their, “30 Worst Brokerage Firms”. This is an interesting step on the behalf of the attorneys representing investors. 

Firstly, it adds more pressure on FINRA to give out bulk data to firms like this or to give a good reason as to why not being that it all is available on their flagship BrokerCheck site.  Given the march towards more transparency we assume that FINRA will at some point be providing lists or subsets of these advisors to the general public.  Attorneys representing investors will be drooling over that level of detail which will allow them to target clients of those with a previous dispute track record.  Generating new allegations against advisors with previous customer dispute allegations makes turning “nuisance settlements” easy money.

Secondly, FINRA’s confirmation of the broker ranking as well as their focus on regulatory investigations of these “high-risk” brokers, means that advisors who plan on staying in the industry for the long-term need to be proactive about removing themselves from this list immediately.  Whether the heat comes from FINRA, the SEC, securities litigators, or simply from a single lost potential prospect, there is no upside to ignoring meritless customer complaints that can be expunged through FINRA arbitration.