I get the fact that anyone silly enough to work for a broker-dealer knowingly chooses to live in a fishbowl.  Thanks to BrokerCheck, you can very easily learn more about a registered representative than you can about, say, a doctor, a teacher, a lawyer, you name it, all through a couple of mouse clicks.  But, this is no secret, as I said.  It is the price one pays to work in the securities industry, and I suppose that if one feels strongly enough about not having to disclose a baseless, frivolous complaint from a customer, or an unpaid tax lien, or a personal criminal history, then, arguably, one should find a different profession, where such things do not have to be shared with the public at large.

My problem is not, therefore, with BrokerCheck per se (although I remain convinced that FINRA’s ongoing and vigorous – but largely vain – efforts every year to increase the public’s awareness of BrokerCheck just go to show that no one actually cares very much about it).  Rather, my problem is the use that claimant’s counsel make of the information available in BrokerCheck, particularly reported arbitrations, disciplinary actions taken by regulators, and even customer complaints that remain pending, or were even dismissed.  In short, they take that information – which, in theory, is designed to enable investors to check out prospective brokers, to decide whether to trust them with their investments – and turn it into advertisements, soliciting customers to engage them to file arbitrations in an effort to recover alleged losses.

Just in case you don’t know what I’m referring to, let me walk you through how it works.  And believe me, there are probably hundreds, or even thousands, of examples.

The lawyers start by taking advantage of the search algorithms buried beneath the surface of Google, acquiring and utilizing website domains designed to pop up in response to searches for lawyers who handle customer cases.  Sort of like www.sueyourbroker.com (which, remarkably, seems to be available).  When you click on that link, you are directed to the law firm’s actual website.  There are likely dozens of these domain names.  Some are specific to particular products, so if a customer invested in a certain investment that has not performed to expectations, the thought is that they will be directed to these websites.

Once you get to the actual website of the law firm, there, you will be presented with page after page of things that read like press releases, with headlines announcing that the law firm is “investigating” – that is the verb most often used, for some reason, even though, in fact, there is no such investigation – some person or some firm that was obligated to disclose in his or her Form U-4 (or Form BD, in the case of a BD) a complaint, an arbitration settlement or award, or a regulatory matter.  The body of these “press releases” then simply parrot the language found in BrokerCheck, leading to the big finish, which is a blunt, no-nonsense solicitation: If You, Too, Have Done Business With This Guy (or This Firm), Hire US So We Can Go After Him And Accuse Him Of The Same Thing.

These are, of course, advertisements, and the lawyers who publish them are typically very careful not to say anything that is false (since to do could be defamatory).  Thus, for instance, if they run one of the press-release-sounding ads to take advantage of the disclosure of the filing of a regulatory complaint – which, of course, contains nothing but unproven allegations – they will be sure to bury the word “alleged” in there, somewhere, so they cannot be accused of actually stating that someone committed securities fraud.

Because these ads do no more than repeat (albeit in fancy, formal sounding language) information that is otherwise available to the public via BrokerCheck, there is basically nothing that you can do to stop it.  Assuming that the lawyer has not said anything actually false, requests or demands to take these “press releases” down from the website are met with laughter, or worse.  (What could be worse?  I have had claimants’ lawyers retaliate against clients who insisted that I at least try to get their names removed from these websites by actually increasing their efforts to solicit business against such clients.)

It is very frustrating, and sad, for me to have, basically, the same conversation, over and over again, with different clients.  Yes, it sucks that when you Google your name, the first three pages of results are simply lawyers hoping to sue you.  Yes, it is frustrating that there is nothing to do about that.  Yes, it would be nice if FINRA cared even in the slightest about this issue.  Sorry.  Sorry.  Sorry.

What made me think about this issue today is what happened recently regarding GPB.  GPB is an investment that hasn’t done too well.  In the least shocking development ever, that has resulted in a TON of arbitrations against BDs and registered reps, all alleging that they failed to figure out that GPB was operating some sort of fraud.  Every claimant’s counsel in the world probably has some “investigation” regarding the sale of GPB on their website.  Yet, these arbitrations came in the absence of any actions being taken by regulators, in the absence of any findings that GPB was, in fact, a fraud.  Well, that has changed.  Two weeks ago, the SEC, along with seven states, filed civil actions against GPB, and the DOJ filed a criminal case against three individuals associated with GPB, alleging – ALLEGING, not actually FINDING – that GPB was operating a “Ponzi-like scheme.”

And you know what this will mean: the websites of every claimant’s counsel will be updated immediately to disclose this development, and encourage investors to hire them…not to sue GPB, but, rather, to sue the poor BDs and RRs who sold them GPB.  I have looked, and, not surprisingly, the updates have already been made by most.

But what is very interesting is that the claimant’s lawyers point to the SEC, state and DOJ complaints as evidence of wrongdoing that investors should take into consideration, but they do not bother to state that according to the allegations in these complaints, the BDs who sold GPB were ALSO VICTIMS OF GPB’S ALLEGED FRAUD!  That is, the U.S. Government has taken the position in the formal pleadings that it has filed that GPB defrauded not just the investors, but the BDs, as well, by providing them with due diligence materials that contained false information.  The complaints do not state, or even suggest, that the BDs should have been able to figure out that the information GPB supplied was false.

Yet…the claimant’s lawyers ignore this allegation completely, talk simply about the fraud, the fraud, THE FRAUD.

So, to conclude my little rant, here is my wish list – and I call them wishes because I am well aware that none of these things will ever happen:

  • FINRA does something to prevent lawyers from using information in BrokerCheck simply to advertise for new clients
  • State Bar Associations do something to prevent lawyers from using the same information in advertisements to solicit new clients
  • FINRA tweaks BrokerCheck so that mere complaints, i.e., complaints that have not resulted in anything being done, are not disclosed
  • Complaints that are dismissed, or withdrawn, should be automatically expunged from an RR’s CRD record
  • In the same sense that communications by BDs with the public must be “fair and balanced,” ads placed by lawyers should tell the whole story. So, for instance, ads referencing the GPB complaints should have to explicitly disclose that there is nothing in those complaints that could serve as evidence of wrongdoing by a BD.

I truly feel badly for those among my clients who find themselves the victims of these advertising campaigns.  This is not why BrokerCheck was created, not at all.  Yet, FINRA sits back and lets this happen.  So, I guess you guys get a two-fer here: a reason to dislike both FINRA and lawyers.