Investment Brokers Find It Easy to Edit Their Regulatory Records

When it comes to brokerage firms or investment advisers, BrokerCheck, the website run by the Financial Industry Regulatory Authority, says it “should be the first resource investors turn to when choosing whether to do business or continue to do business with a particular firm or individual.” The site provides a regulatory report card, showing “professional background information on approximately 1.3 million Finra-registered brokers.” The records, not available anywhere else, are supposed to alert investors before they hand their money to someone with a history of overcharging or recommending sketchy products. One problem: Brokers find it surprisingly easy to erase unfavorable information from their records.

Two years ago, Arthur Mel Coffey, a stockbroker working for John Thomas Financial in New York, was accused of fraud by a group of clients who said they lost $200,000, according to Finra documents. Details of the allegation were not available. The case went to arbitration—brokerage firms require clients to waive the right to sue in court and instead submit disputes to arbitrators working for Finra. Before a ruling was issued in Coffey’s case, John Thomas settled with the clients for an undisclosed amount. Then Coffey told the arbitrators hearing the case that the investors who had just settled were lying. In April the arbitrators allowed him to remove the case from his record.