Securities Lawyers Blog
The attorneys at Gana Weinstein LLP have reviewed BrokerCheck records reports that broker Erik Drewes (Drewes), currently employed by American Capital Partners LLC, has been subject to at least three customer complaints during his career. According to records kept by The Financial Industry Regulatory Authority (FINRA), Drewes’s customer complaints allege that he participated in churning and failed to perform adequate due diligence on REIT investments. However, these complaints have been expunged from Drewes’ record under FINRA’s notoriously flawed expungement procedures. The expunged complaints are as follows:
In April 2020, a customer complained that Drewes violated securities laws by alleging that Drewes failed to do adequate due diligence on a REIT before investing in it. The claim settled in the amount of $14,900.
In November 2014, a customer complained that Drewes violated securities laws by alleging Drewes engaged in unsuitable investment advice and churning. The claim settled in the amount of $110,000.
In April 2008, a customer complained that Drewes violated securities laws by alleging Drewes failed to supervise in relation to unauthorized and excessive trading. The claim settled in the amount of $12,795.
Our firm believes that Drewes’ clients and potential clients now lack relevant information in assessing the risk of doing business with Drewes due to FINRA’s flawed expungement practices. As detailed below, you can judge for yourself whether or not Drewes merits the clean record he now enjoys. As shown in Drewes’ expungement “award”, Drewes sued his own employer for damages of $1.00 due to the placement on his record of three customer complaints. The “hearing” that took place appears to have been perfunctory at best. The hearing concerning three customer complaints took only one hearing session to complete. Usually there are two hearing sessions a day – meaning in this case three cases were probably decided in time for the arbitrator to catch lunch. The total cost to Drewes by FINRA to expunge three customer complaints from his record was $100 – excluding any fees he privately paid his counsel.
Expungement should only be granted in cases where the information is clearly erroneous and has no probative value – not when an arbitrator quickly decides an investment recommendation was suitable. Expungement is not simply a process to determine who would have won absent a settlement but a remedy to provide only when the complaint has no truth to it or arguable merit – a very rare circumstance. In our opinion it would be extraordinarily rare and in reality, impossible for three investor complaints to all have no truth or merit.
Such decisions highlight the easy manipulation and exploitation of a system that now hundreds of brokers appear to utilize to clear their records of valuable information the public needs for their protection. According to the PIABA Foundation, 1,078 expungement-only cases have been filed from 2015 to 2018. The study concluded that “The Finra [expungement] process is being systematically gamed, exploited and abused with one-sided hearings, manipulation of arbitrator selection, deletion of significant customer complaints and abusive (and possibly fraudulent) conduct to such an extent that it must be frozen until it can be repaired.”
The public now has a right to question the legitimacy of FINRA’s BrokerCheck system that allows broker records to be easily cleaned.
Investors who have suffered losses are encouraged to contact us at (800) 810-4262 for consultation. At Gana Weinstein LLP, our attorneys are experienced representing investors who have suffered securities losses due to the mishandling of their accounts. Claims may be brought in securities arbitration before FINRA. Our consultations are free of charge and the firm is only compensated if you recover.