Customer Complaints

When a customer of a brokerage firm makes virtually any complaint (written, oral, or otherwise), it triggers a regulatory obligation on the brokerage firm to disclose that complaint on the Central Registration Depository (“CRD”) record of the financial advisor “involved” in the alleged misconduct. This disclosure then becomes publicly available through FINRA’s BrokerCheck system.

Customer complaints can be formal, informal, written, or oral.  And all types of complaints can negatively impact the underling industry member’s rights and reputation.   A formal complaint occurs where a customer initiates a lawsuit (typically through binding FINRA arbitration) in connection with the handling of their brokerage accounts.  Formal complaints impact the rights and reputation of the involved industry member more than informal complaints.  These rights are impacted even when the customer does not name the involved industry member as party to the formal lawsuit.

All customer complaints, regardless of their level of formality, can create a conflict of interest between the brokerage firm, who may want to resolve the complaint quickly and cheaply at the expense of their employee’s reputation, and the industry member, who may want to fight the allegations, regardless of cost to protect his or her reputation.  Unfortunately, industry members often to not recognize this conflict because their employer (i.e. the brokerage firm) does not adequately inform them of its existence.  Or, that the industry member can and should have their own independent counsel to advise them as to their own interests.

This inherent conflict often renders results that can have a permanent, negative on the industry member’s reputation.