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Financial Brokers Could Be Hiding A History Of Complaints

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Wall Street (Source: CBS4)

Wall Street (Source: CBS4)

Eliott-Rodriguez-600x450 Eliott Rodriguez
Eliott Rodriguez is an Emmy Award winning journalist and respe...
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MIAMI (CBSMiami) – Those who use an outside source for financial help should know that their professionals could have an important secret. A history of complaints could have been wiped clean.

A study has shaken up the financial industry, which revealed that in an alarmingly high percentage of cases, brokers have gotten investor complaints removed from their publicly accessible records.

Experts gave details and tips on how to pick the right professional.

When a new trading day opens, people want their investments in the right hands. That’s why Damon Petraglia thoroughly checked out his financial advisor.

“It’s very important for me to have somebody reliable and capable,” said Petraglia.

However, Petraglia is no average investor, he’s a private investor. People hire him to check out their stock brokers.

It’s easy to get background information on any federally licensed financial professional on the “financial industry regulatory authority” or FINRA’s website.

These public records list licenses a broker holds and where they’ve worked but what you may not see even surprised Petraglia.

“I don’t think very many people knew about this,” said Petraglia. “It is the security industry’s dirty little secret.”

The secret, revealed in a new study which said stock brokers are able to keep complaints filed against them a secret in many cases.

Brokers have the right to request a complaint be “expunged” from their record if they feel it was false.

Federal guidelines say expungement is an “extraordinary relief” but this study found between mid-May 2009 to 2011. When cases were resolved by settlements, arbitrators approved brokers requests to remove complaints from their records nearly 97 percent of the time.

“This is a major problem that must be fixed,” said Petraglia.

If a broker’s record is wiped clean, there is no way investors, regulators or future employers can find out.

The study found one broker requested expungement 40 times and arbitration panels granted it 35 times.

The group behind the study said sometimes investors are given a settlement trade-off.

“There will be a provision that says in exchange for that money the customer has to agree not to oppose the expungement request and it just basically just wipes it under the carpet,” said Petraglia.

FINRA is taking action and said the study “underlines and emphasizes serious concerns.”

The agency sent notices to arbitrators, reminding them about “the extraordinary nature of expungement relief.”

But what if a broker was wrongly accused or a financial issue just wasn’t their fault?

“We closely guard our reputations so if there’s something where we have complaints against us that are unwarranted or unfounded we want to protect our reputation,” said Ed Gjertsen.

Gjertsen of the Financial Planning Association said just because an adviser went through arbitration doesn’t mean they’re a bad broker. If someone is concerned about their financial professional, they should ask about their record.

“I think what the study showed us is that there’s probably a lot more due diligence that the average investor has to do. Whether it’s engaging with an advisor and asking them the direct question of saying ‘Hey have you ever been involved in arbitration?’” said Gjertsen.

Investor and investigator Petraglia said he thinks his financial shake up should be a financial wake up to everyone.

“If you picked a bad broker, you could lose the entire investment,” said Petraglia.

A court must also approve a broker’s expungement request before it becomes final.

FINRA is reviewing its rules and may consider future changes as well. Several U.S. Senators have also taken a closer look at the system. One wrote a letter to the SEC demanding big changes.

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