Securities brokers who think California's state court system offers an easy path for erasing details from their public records may want to think again.
Wall Street's industry-funded watchdog is having some success as a fierce opponent.
One broker recently lost his 2.5-year California court battle to clear old complaints from his license. Another is fighting the Financial Industry Regulatory Authority (FINRA)'s efforts to move his case out of the state to federal court.
A state appeals court decision there last year gave some of the nation's 635,000 brokers hope that going to court in California could be an attractive alternative to FINRA's process for cleaning up, or expunging, unflattering details from their records. About 44 percent of U.S. brokers are licensed in California, according to the state's securities regulator.
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That decision, in August 2012, made clear that California state judges could decide expungements based on what they thought was fair, instead of applying FINRA's expungement rules, which require proof that the information is false or erroneous.
But as the two current California cases show, anything is possible, even an unfavorable result. At the very least, brokers taking their cases to the Golden State can expect a fight, since they must name FINRA as a defendant. The regulator has opposed the brokers in these two cases at every turn.
Never too old
One of the brokers, Edwin "Mike'' Lickiss, cited problems that dated back to 1986, when he worked for a predecessor of the brokerage unit of LPL Financial Holdings Inc and started selling shares of a real estate investment trust, or REIT.
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The REIT filed for bankruptcy in the early 1990s, after its manager took $7.2 million in cash. Then, 17 customers filed a total of $1.5 million in arbitration cases against Lickiss, alleging that he did not disclose the risks. While most of them settled, the details are still on his public record.
Now, they will stay. "The public interest is best served when investors and regulators have complete access to accurate information regarding the history'' of brokers, wrote California Superior Court Judge Steven Austin in an Oct. 21 opinion.