DEFENDING YOUR PROFESSIONAL INTEGRITY
Stay current on recent changes in the regulatory environment
Most advisors over a long and tenured career will inevitably run into the disgruntled client that initiates a meritless customer complaint. These days, B/D compliance departments are on edge, and any text, phone call, email or off-hand remark will be treated with alarm. Once the “pending” customer complaint flag is thrown up, advisors and compliance must respond with a thorough investigation of the merits of each allegation and defend them vigorously. Whether the B/D denies the claim, settles the claim to avoid litigation, or if the client simply withdraws or drops the dispute, advisors must now be branded with a Customer Dispute Disclosure on their U4. This disclosure is promptly displayed on the advisor’s BrokerCheck profile per FINRA Rule 8312.
At this point, advisors may make the mistake to assume the “case is closed” and any harm derived from this meritless customer dispute is finished. Many advisors may think, “it’s only one, I can handle that in any conversation where a client brings it up.” However, advisors should be aware that there are industry groups “scraping” data from BrokerCheck to actually drum up and create more customer complaints. There are half a dozen law firms (representing individual investors) that automatically pull the customer dispute data from BrokerCheck and plug that into their own branded website. This new webpage names the advisor and the relevant customer disputes alleged similar to BrokerCheck. As you can imagine, when a current or potential client types this advisor’s name into a search engine, they are met with the law firm’s well-crafted and high-ranking webpage with the sales pitch, “Have you or someone you know also lost money on an investment with this broker?”
These webpages are quick to include terms like, “fraud”, “churning”, “breach of fiduciary duty”, just to name a few. To further reduce any potential barrier to a meritless complaint, these firms will charge on a contingency fee basis. With no skin in the game, clients can line up to lob allegations with the knowledge that many firms will simply settle for a percentage of the damages requested. With industry changes such as the recent DOL ruling, you can bet that these sites are going to capitalize.
This type of environment can become a virtual Petri dish for customer disputes against a financial advisor. One complaint can spawn another which can spawn a third. So as the number of disputes grow, so does the chance of further claims.
This is why it can be critical to get even one customer dispute expunged from BrokerCheck and your CRD. If you already have one, or several, dispute disclosures call or email us today so that we can defend your professional integrity.
EA, Executive Vice President
3400 Industrial Lane, Unit 10A
Broomfield, CO 80020
This blog is my ongoing effort to inform and educate FINRA licensed professionals about the evolving regulatory ecosystem in which we operate.