Linder, for example, is one of the most frequently selected arbitrators in the country and despite the “extraordinary” burden that brokers must overcome to gain expungement, he grants expungement requests almost 100% of the time, Doss and his co-counsel, former SEC Branch Chief Lisa Braganca, argued on behalf of the Alabama Securities Commission in the motion.

A PIABA review found the broker practice of using expungement arbitration to erase all evidence of their wrongdoing has exploded by more than 1,000% since 2019. The trade group for investor attorneys argued expungement requests are “rubber-stamped” by arbitration panels 90% of the time.

“Expungements have become a cottage industry and we want to help Finra understand what we’re seeing in the trenches,” Borg said.

While arbitrator selection is supposed to be random, Linder was chosen in 25 out of his 36 expungement cases (69%) by just two law firms—Bressler Amery and Advisor Law, which specialize in expungements—Alabama argued. Linder also granted the expungement of multiple customer complaints in single arbitrations and in one such case erased 29 complaints against one broker, the complaint says.

Alabama also said in its motion that the top three Finra arbitrators in the country, who were selected by law firms representing reps seeking to erase customer complaints, “recommend expungement in almost every case.”

But the issues that tip the scale in brokers favor don’t stop there, Alabama argued. Because of the explosion in “straight-in” arbitrations, which allow brokers to name their current or former broker-dealer as a respondent rather than naming the customers who complaints they seek to erase, customers may never get notice of the proceeding or get the chance to testify. As it is, the PIABA found that customers whose complaints are the subject of expungement requests participate and object to brokers’ expungement requests just 13% of the time.

Doss and Braganca have made it a point to find and represent customers in eight expungement arbitrations in the past two years, successfully blocking six of the broker’s claims. “We get a chilly reception when we show up,” Doss said.

Broker-dealers, too, rarely object to expungements since they erase customer complaints referencing their firm, Doss said. The PIABA found that in 1,078 arbitrations filed by brokers against their brokerage firms as straight-in expungement cases between January 2015 and July 2019, brokerage firms objected just 23 times. 

Without an opposing party, arbitrators have almost no choice but to affirm expungements, especially with regard to customer settlements which are typically private and therefore provide no evidence, Borg said.

That leaves federal and state regulators with no customer complaint records to review when brokers and advisors seek to register, Alabama’s top securities cop added.