Yesterday, The New York Times published an article on the “checkered history” of Wall Street reporting infractions by its brokers.

The article cited numerous examples over the last several years of Wall Street’s failure to report infractions in a timely fashion (or in a few cases, a failure to report anything at all) to FINRA, the nongoverment regulator that oversees brokers:

  • Last year, Morgan Stanley Smith Barney took months to report that its broker Martin Joel Erzinger was charged with a felony when he “hit a cyclist, leaving the rider seriously injured on the side of the road” and abandoned his car in a Pizza Hut.
  • In 2004, Morgan Stanley was fined $2.2 million for failing to report 1,800 customer complaints and other wrongdoing.
  • Citigroup was fined $150,000 in 2010 for filing “inaccurate” disclosures about 120 brokers who were accused of theft or fraud.
  • In 2010, Fifth Third Bank was fined for failing to disclose that seven of its brokers had “personal financial blemishes” including bankruptcies and liens.

What can you do to protect yourself?

Do your own homework or hire a professional to do the work for you.

While FINRA recently expanded the information available about brokers through its online BrokerCheck service, you can still get much more detailed and historical information from your local state securities regulators.

Additionally, you can hire a professional private investigator to identify information that may not be fully disclosed on regulatory records including past bankruptcies, criminal records, liens, civil lawsuits and historical arbitration awards involving your broker.

Waiting for your financial institutions to self-report a felony, bankruptcy or allegations of fraud is a recipe for disaster. You can’t always rely on regulators to do the work for you; just ask the victims Bernie Madoff.

Photo used under Creative Commons from epicharmus.


Enjoyed What You Read?

Sign up for our newsletter and stay up to date with what Hal Humphreys, from Pursuit Magazine, believes to be one of the absolute best blogs in the investigative industry!