New York Securities Lawyer Blog
On December 4, 2014, Lax & Neville LLP won expungement relief for James R. Young (“Mr. Young”), a registered representative formerly employed by UBS Financial Services, Inc. (“UBS”) who sought expungement of nine (9) customer complaints on his Central Registration Depository (“CRD”) record pursuant to the FINRA Code of Arbitration Procedure, Rules 2080 and 12805. CRD is the central licensing and registration system for the U.S. securities industry and its regulators, which contains information made available to the public via FINRA’s BrokerCheck. Pursuant to FINRA Code Rules 2080 and 12805, an arbitration panel may grant an expungement of customer dispute information from a registered representative’s CRD record. In the FINRA arbitration, Mr. Young asserted that he and his clients were all victims of UBS’s “product problem” relating to its offering, developing, marketing and selling structured product investments issued by the, now bankrupt, Lehman Brothers Holdings, Inc. (herein “Lehman Principal Protected Structured Products”). Mr. Young requested the expungement of Lehman Principal Protected Structured Products arbitrations and customer complaints from his record on the basis that he was not involved in the alleged wrongdoing.
On October 7, 2014, the Panel in the FINRA arbitration conducted a recorded telephonic hearing in which Mr. Young was given the opportunity to present evidence regarding his uncontested expungement application. One of the customer Respondents appeared during that hearing and supported Mr. Young’s application for expungement.
In its Arbitration Award, the Panel recommended expungement of all references to nine (9) Lehman Principal Protected Structured Products customer complaints and arbitrations from Mr. Young’s registration records maintained by the CRD. Pursuant to Rule 12805 of the FINRA Code of Arbitration Procedure, the Panel based its ruling on the following Rule 2080 affirmative findings of fact:
1. the registered person was not involved in the alleged investment-related sales practice violation, forgery, theft, misappropriation or conversion of funds; and
2. the claim, allegation or information is false.
In its Award, the Panel stated that it made the Rule 2080 findings of fact based on the following reasons:
The statements made by UBS, [Mr. Young’s] former employer, in [Mr. Young’s] U4 and U5 records are false and misleading because any sales practice violations were caused by UBS, not [Mr. Young]. Specifically, the Panel finds that the UBS Structured Products Department continued to tout Lehman Brothers structured products despite (1) mounting evidence that Lehman Brothers’ creditworthiness was crumbling, and (2) increasingly pointed concern among UBS executives that the sale of Lehman Brothers products should be suspended. UBS’ Structured Products Group deliberately prevented the distribution of material information about Lehman Brothers’ deteriorating financial condition and continued to recommend the sale of Lehman Brothers structured products despite clear evidence of the company’s rapid decline, to the detriment of both its financial advisors and customers.
UBS never should have reported any of these claims on Mr. Young’s CRD. Not only was Mr. Young not named in any of the aforementioned arbitrations, but there were no allegations that he was involved in any of the alleged sales practice violations in the arbitrations or customer complaints. The Panel agreed that these disclosures should never have been reported on Mr. Young’s CRD and awarded expungement, which is significant to Mr. Young’s career because his CRD record contained disclosures which were false and misleading to investors.
Our firm has experience handling these types of expungements and is able to properly guide brokers through the process. Please contact us at (212) 696-1999, if you are a broker seeking expungement of several customer complaints that arose because of a product problem.