DEFENDING YOUR PROFESSIONAL INTEGRITY
Stay current on recent changes in the regulatory environment
As we have been continuing to report since December 6th, 2017, FINRA has proposed changes to gut the expungement process for financial professionals who seek expungement of meritless customer disputes under Rule 2080.
As we only represent the financial advisor, we talk to thousands of reps, nearly all of whom are enraged at the prospect of losing basic due process under the FINRA arbitration rules. Whether you currently have a meritless dispute, fear allegations being indiscriminately lobbed at you in the future, or simply wish to retain the basic American rights of "innocent until proven guilty" you should read our formal response to FINRA pointing out the problems with these new measures.
Including, and not the least of which is, FINRA's assertion that any customer dispute disclosures over 12 months old will NOT BE ELIGIBLE FOR ANY REMEDY under the new arbitration rules.
Aged false, erroneous, impossible and defamatory claims against you and your business will be permanent.
Monday, February 5th, was the end of the comment period. Now we wait on the decision of a "self-regulatory" organization that has done little to protect the livelihood of their own financial professionals.
Many financial professionals have pre-tax dollars provided by their firm to help them market and advertise their business. Unfortunately, with the ubiquity of BrokerCheck and Google, any monies spent on advertising or building referrals can work against an advisor that has negative disclosures on their record.
This year, resolve to use those pre-tax dollars on building your brand through the expungement of any negative disclosures. Whether it be meritless customer disputes, frivolous college pranks that resulted in criminal charges, or messy U5 terminations from previous employers, FINRA currently affords you the right to prove that these disclosures offer no investor protection.
You not only get the benefit of having a clean record but then all of those additional marketing dollars are spent shining the light on an unblemished BrokerCheck profile. One that you can be proud of, one that distinguishes you as an advisor who can be trusted to manage your clients' most important assets.
So let your compliance department know that you would like to spend that business development allotment on your professional reputation this year. It not only helps your business and it helps your firm in having one more advisor with spotless record.
As we barrel into 2018, many financial advisors are fielding calls about year-end tax implications for their clients. Not only on what deductions to squeeze into 2017 but on how the recently-passed Republican tax plan (calculator here) may affect their taxes for next year versus this year.
Prudent financial advisors considering expungement or other legal/arbitration services may want to take a moment to review their own tax implications as well in the coming days.
If you received income via 1099 as a sub-contractor (Schedule C), you may likely have the ability to deduct expenses for expungement cases directly as a legal expense.
Alternatively, if you are an employee paid wages via W-2, then you may be able to itemize your legal expenses (Schedule A) if it's for matters that help you produce income. You can learn more from IRS Publication 529 on the tax limits involved (2% of AGI). Obviously, you should always consult your tax accountant for a final say.
With the recent proposed rule changes from FINRA looking to shut the door on expungement, as well as the possible tax advantages given the new plan, it's imperative for advisors to take a little time this week to ensure they are spending their own money wisely.
As 2017 draws to an end, we just reached our internal goal and a huge milestone in the industry of obtaining our 100th FINRA expungement award this year for our financial advisor clients.
We thank all of the advisors, brokers, and wealth managers that took a chance on us in our early days and helped us achieve the only equitable resolution to the many meritless allegations that FA's receive.
There is no other firm advocating only for advisors in this industry.
50% of the attorneys represent customers in bringing these bogus claims, the other 50% of attorneys give half-hearted defenses that end up in settlement checks for the customer and a new disclosure on the FA's BrokerCheck profile. In FINRA's zeal to protect the investor, even at the cost of their own constituents, absolutely no one but AdvisorLaw is actually advocating on behalf of the financial advisor.
You know we've been doing good work when FINRA is now proposing to take away the expungement option for advisors due to us. We will continue to fight for advisors to have the option to prove their innocence in meritless customer disputes, frivolous criminal disclosures, and defamatory U5's as we move into 2018.
If you haven't already done so, please make your voice heard with FINRA by emailing your comments on the proposal to email@example.com (reference Notice 17-42). Having a transparent record of disputes is a great concept but it has to be fair.
We at AdvisorLaw look forward to helping you continue to clean up these nuisance claims in 2018 and preserve your rights to the minimal due process you're afforded by your own industry regulators.
On December 6, 2017, FINRA officially announced what may prove to be one of the most important Rule changes to brokers with one or more customer disputes.
What Has Been
2000 thru 2010 - FINRA removes certain meritless disclosures automatically after 24 months (no charge, no hoops to jump through)
2010 thru 2017 - FINRA puts back up those disclosures that were removed over the previous 10 years and now requires that you go through a lengthy and expensive arbitration to have them removed under Rule 2080.
2018 forward - FINRA proposes to eliminate the option for advisors to expunge customer disputes that were posted more than 12 months ago.
The newly released Reg. Notice 17-42 introduces a slew of proposed modifications aimed directly at frustrating the process for brokers to have false, misleading, or irrelevant information expunged from their records AND proposes that it goes away completely!
What Is Proposed
The biggest changes that will affect an advisor with disclosures are:
Who This Affects
A quick review of the winners and losers here reads like most every change FINRA enacts as a "self-regulatory organization":
What Financial Advisors Should Do
FINRA is currently accepting comments on the proposed changes to the Code of Arbitration Procedure Relating to Request to Expunge Customer Dispute Information (Reg. Notice 17-42). They are closing the comment period on February 5, 2017; there is not much time to act.
You must contact them in order to have your voice heard.
- You can email them at: firstname.lastname@example.org - just note that this is in response to Reg. Notice 17-42.
- You can mail them a letter at:
Office of the Corporate Secretary
1735 K Street NW
Washington, DC 20006-1506
This blog is my ongoing effort to inform and educate FINRA licensed professionals about the evolving regulatory ecosystem in which we operate.