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Large Merrill Producer Gets Arbitration Award to Expunge Multiple Customer Dispute Disclosures

Miami, FL Merrill Lynch broker Patrick J. Dwyer, a large producer who routinely appears on “top advisor” lists, recently obtained an arbitration award ordering FINRA to expunge seven customer dispute disclosures, which included one arbitration, from his CRD customer complaint history

How he got that result is a somewhat unusual story.

That story begins in 2013. At that time, Dwyer retained a California attorney to file suit against FINRA in California state court seeking an order compelling FINRA to expunge the seven disclosures. Why would a Florida broker sue FINRA in California? Dwyer’s attorneys filed the complaint against FINRA identifying Dwyer as “John Doe.” Anonymous filings typically involve juveniles, victims of sexual abuse or people suffering from disabilities. Dwyer’s attorneys argued that his name should not be revealed due to the potential harm to his reputation should members of the public (who are not aware of FINRA’s BrokerCheck website) learn of the existence of the suit and his complaint history. Apparently, California state judges have a reputation for being more open to the anonymous filing of lawsuits than their judicial brethren in other jurisdictions.

The judge permitted the original complaint to be filed anonymously but other documents filed in the matter identified Dwyer.

FINRA, as is its practice when brokers file suits directly against FINRA in state court seeking an expungement order, attempted to remove the case to federal court. They were ultimately unsuccessful and the case stayed in state court.

But so was Dwyer; his identity eventually became known to the media who reported the existence of the suit in 2013 and the state judge denied his request for an order compelling FINRA to expunge the disclosures.

Dwyer then retained Florida arbitration attorneys who filed a claim against Merrill Lynch seeking an award ordering expungement.

While Merrill was the named respondent, Dwyer’s attorneys made it clear they were not making allegations of any type of misconduct against Merrill; they were simply seeking an order from the panel under FINRA Rule 2080 directing FINRA to expunge the seven disclosures. Additionally, Dwyer requested that all administrative costs assessed by FINRA and/or the panel relating to the arbitration be charged to him. Merrill filed an answer stating that it supported the expungement request.

The arbitration award shows that the panel reviewed all seven discourses and stated in the award the specific reasons that they felt expungement was appropriate for each disclosure (as required by Rule 2080). Dwyer notified the customer who filed the arbitration claim of the expungement request, and two of the other customers who made complaints. Evidence was presented showing that none of them objected to the request.

Additionally, the panel noted that at least two of the complaints related to a Merrill proprietary product with defects unknown to Dwyer at the time of sale.

No specific reference to the earlier court case was made in the award. The panel did state that Dwyer explained that the delay in seeking the expungement of the disclosures, two of which went back to 2001, was due to his lack of knowledge of FINRA expungement procedure.

There are certain aspects of this matter that benefited Dwyer. He has been in the securities industry for 23 years and has spent all that time at Merrill. Merrill explicitly supported his expungement request. He has no reported regulatory investigations/inquiries. The six customer complaints were all denied or closed with no further action. The panel, which held an in-person hearing, stated that Dwyer’s testimony was credible and accepted his explanation for the settlement of the one arbitration claim.

Aside from the issue of the “John Doe” filing, was it wise for Dwyer to first file the suit directly in court? One news article reporting on this case stated that 520 requests for expungement were made in 2012; 48 of them were filed directly in court naming FINRA as a defendant. So it is certainly not unheard off for brokers to file expungement requests directly in court.

But it was the attempt to maintain his anonymity that was the most likely motive for Dwyer’s initial court filing. However, the court ultimately denied the expungement request. To the contrary, the language in the arbitration award suggests that the panel was extremely receptive to Dwyer’s arguments as to why expungement was appropriate for him.

It would seem, at least in this instance, Dwyer might have had that expungement order granted several years ago if he had made the decision to proceed in arbitration at the outset.

For any broker with old or frivolous customer complaint disclosures on their CRD, this case highlights the need to retain experienced securities employment attorneys before considering expungement. The attorneys at Lubiner, Schmidt & Palumbo can evaluate the likelihood of success and recommend an effective and economical course of action to clear your complaint history.

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