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Stockbroker Wins Expungement of Two Edward Jones Customer Complaints
March 24, 2022
Why expungements are processed by FINRA's Dispute Resolution Service in an arbitration forum rather than before a regulatory panel is another debate for another day. In today's blog, we have an expungement case in which a FINRA arbitrator recommends the removal of two customer complaints from a stockbroker's industry record. For opponents of FINRA's expungement process -- of which there are many and, often, with meritorious concerns -- today's case should serve to demonstrate that there are, indeed, circumstances where an expungement is appropriate. In one customer complaint, we have "factually impossible" allegations, and in the other complaint, we have "clearly erroneous" allegations. Ah yes, the collision of the impossible with the erroneous!
Case in Point
In a FINRA Arbitration Statement of Claim filed in August 2021, associated person Claimant Amann sought the expungement of settled customer disputes (Occurrences #1609210 and #1606258) from his Central Registration Depository records ("CRD"). FINRA member firm Respondent Edward Jones did not oppose the request relief.
In the Matter of the Arbitration Between David McFarland Amann, Claimant, v. Edward Jones, Respondent (FINRA Arbitration Award 21-02043)
https://www.finra.org/sites/default/files/aao_documents/21-02043.pdf
Although notified of Claimant's request for an expungement of their complaints, the customers involved did not participate at the scheduled hearing.
The sole FINRA arbitrator recommended the expungement of Occurrences #1609210 and #1606258 from Claimant's CRD based upon a FINRA Rule 2080 finding that the customers' claim, allegation, or information is factually impossible or clearly erroneous. In recommending the expungements, the sole FINRA Arbitrator offered this rationale:
Occurrence Number 1609210Factually impossible because: The conduct complained of was an error in account amount that was made by the firm, not Claimant, and could not have been made by Claimant since he was not the person at the firm involved in making the type of entry that was erroneous in this occurrence. The firm acknowledged that the error occurred at the branch and was not Claimant's responsibility.Occurrence Number 1606258Clearly erroneous because: The alleged misconduct of not telling the customer the tax implications of a transaction was clearly erroneous because Claimant advised Ms. S in numerous undisputed and well documented ways that he was not responsible for giving tax advice and that Ms. S should seek tax advice on the tax effects of the transaction at issue
Bill Singer's Comment
The BrokeAndBroker.com Blog does not offer extensive coverage of FINRA's Dispute Resolution Service's Expungement docket. The lack of coverage is, in part, engendered by the relatively mundane and assembly-line approach with which FINRA's arbitration forum handles the bulk of such cases; i.e., when approved, the arbitrators cite Rule 2080, offer some cursory comment on the underlying facts, and then summarily recommend expungement. In those Awards where an expungement is denied, the facts are sparse and the rationale either non-existent or terse. All of which tends to not make for great reading or analysis.
In today's expungement case, we have two classic scenaria that are set out in atypical fashion by the sole FINRA Arbitrator.
In Occurrence #1609210, we have living proof of a so-called "plain error." As Claimant would simply defend himself against the customer's allegation: "I didn't do it." As confirmed in the FINRA Arbitration Award, the error at issue "could not have been made by
Claimant since he was not the person at the firm involved in making the type of entry that
was erroneous in this occurrence. The firm acknowledged that the error occurred at the
branch and was not Claimant's responsibility." Claimant didn't do it. Someone else did. The employer-firm admitted to the branch's error and absolved Claimant. Can't ask for a more compelling explanation and exoneration.
In Occurrence #1606258, we have the Tax Advice fact pattern, which often crops up in disputes between servicing stockbrokers and their customers. At the heart of this issue is an industry tradition of NOT providing any tax advice to customers. Moreover, this disinclination is often set forth in new account documentation and frequently cited in numerous communications from the firm. You want tax advice? Great -- call your CPA or tax lawyer but don't ask us or your stockbroker.
Of course, as is the case with all such rules, there are more than enough exceptions. On Wall Street, brokerage firms don't like ANY exception to the "don't ask us or your stockbroker" protocol. Unfortunately, customer service being what it is, some over exuberant stockbrokers find ways to skirt the tax-advice prohibition, be it out of their mouths or via a referral. Typically, the rule that No good deed goes unpunished proves a truism as to why the stockbroker should not have got involved with tax advice. Be that as it may, the FINRA Arbitration Award dispels any question as to whether Claimant blurred any lines: "Claimant advised Ms. S in
numerous undisputed and well documented ways that he was not responsible for giving
tax advice and that Ms. S should seek tax advice on the tax effects of the transaction at
issue." As such, game, set, and match for Claimant.
http://brokeandbroker.com/PDF/20802081Expungement.pdf
- FINRA Rule 2080: Obtaining Customer Dispute Expungement
- FINRA Rule 2081: Prohibited Conditions Relating to Expungement of Customer Dispute
- FINRA Rules 12805 and 13805: Expunging Customer-Dispute Information Under Rule 2080
http://www.brokeandbroker.com/index.php?a=topic&topic=expungement