Securities Lawyers Blog
Recently, Steven Orr’s (Orr) attorney reached out to our firm to inform us our posts on Orr was inaccurate. The post detailed that Orr had been subject to five customer complaints concerning allegations of securities law violations including unsuitable investments and misrepresentations among other claims. Many of the complaints involve direct participation products (DPPs) and private placements including oil and gas partnerships, non-traded real estate investment trusts (REITs), and other alternative investments.
Orr’s attorney has brought it to our attention that Orr has succeeded in using The Financial Industry Regulatory Authority (FINRA) flawed expungement process system to remove all five complaints from his BrokerCheck record. As shown in Orr’s expungement “award”, Orr sued his own employer, H. Beck, Inc. (H. Beck) for damages of $1.00 due to the placement on his record of five customer complaints. The “hearing” that took place appears to have been perfunctory at best. The hearing concerning five customer complaints took only one hearing session to complete. Usually there are two hearing sessions a day – meaning in this case five cases were probably decided in time for the arbitrator to catch lunch. The total cost to Mr. Orr by FINRA to expunge five customer complaints from his record was $100 – excluding any fees he privately paid his counsel.
During this less than four hour hearing to decide five cases, H. Beck did not contest the request for expungement. In FINRA expungement cases, brokerage firms like H. Beck profit from being sued by their own brokers to clean their records. Of the five investors that complained concerning Orr’s investment recommendations – four of which resulted in documented settlements and compensation for the victims – none of the investors participated in the short hearing. Only one investor submitted a letter to the arbitrator opposing expungement. In sum, there was no meaningful opposition to Orr’s expungement request.
Without any significant opposition, the arbitrator found that there was “credible evidence presented demonstrated that Claimant made suitable recommendations to each of the Customers, fully and accurately representing the recommended investments including, but not limited to, any associated risks.” Further, “public disclosure of the false and clearly erroneous allegations made by the Customers does not offer any public protection and has no regulatory value.” In other words, the arbitrator found that Orr was the subject of lies by five of his clients – all of which astonishingly appear to have told the same or similar lie concerning Orr’s investment advice. From the record, it appears the arbitrator made this determination without ever speaking to a single client.
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 a claim absent a settlement agreement 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 five investor complaints concerning the same or similar products to all have no truth or merit.
The case study of Steven Orr’s expungement proceeding highlights 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’s like Orr to have clean records.
Investors who have suffered losses are encouraged to contact us at (800) 810-4262 for consultation. Investors may be able recover their losses through securities arbitration. The attorneys at Gana Weinstein LLP are experienced in representing investors in cases of selling away and brokerage firms failure to supervise their representatives. Our consultations are free of charge and the firm is only compensated if you recover.