Via DealBook.
The case casts a light on a persistent problem: the failure of financial firms to properly report infractions to Finra’s central database, a critical tool that large and small investors rely on to vet stockbrokers and other financial professionals.
“It’s really no different than if you’re talking to a doctor,” said Charles Rotblut, a longtime investor and a vice president of the American Association of Individual Investors. “You have to trust who you’re working with.”
For its part, Morgan Stanley Smith Barney says it followed the correct procedures regarding Mr. Erzinger, disclosing the matter once the related court documents became available. The reporting requirement, said Jim Wiggins, a spokesman for the firm, was met in “an accurate and timely manner.”
Finra in 2010 fined Citigroup $150,000 for filing “inaccurate” disclosures about 120 brokers who were fired or resigned after being accused of theft or fraud. In its disciplinary action, the regulator said Citigroup had “hindered the investing public’s ability to access pertinent background information.” Finra fined JPMorgan Chase $150,000 for similar violations in 2009.
Alex Samuelson, a spokesman for Citi, said the bank had “a robust internal reporting system and follows all Finra rules on client complaints and brokers’ records.” A JPMorgan spokesman declined to comment.
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