February 27, 2014

Ex-broker tries to use privacy lawsuit to clean up CRD record
27-Feb-2014 12:46
By Suzanne Barlyn

Feb 27 (Reuters) – A former broker is raising an unusual legal argument to erase an old black mark from his public record: He has sued the Financial Industry Regulatory Authority for violating his right to privacy.

Alan Santos-Buch says the industry-funded regulator continues to make details of a 1997 disciplinary case against him available on its website and in a regulatory document, making it difficult for the ex-broker to get jobs.

Santos-Buch, who worked for a now-defunct firm in Connecticut, had agreed to a $10,000 fine and 30-day suspension in 1997 to settle charges that he had signed and sent a document that guaranteed a customer’s account against losses, a violation of industry rules. Santos-Buch, who had left the securities business the year before he was formally suspended, neither admitted nor denied the allegations.

At the time, he believed the details of his settlement would be publicly available for two years, based on talks he had with FINRA, according to Paul McMenamin, his New York lawyer. The regulator actually had no such rule in place until 2000.

But FINRA changed the rules 12 years after Santos-Buch settled to make regulatory sanctions against ex-brokers permanently available to the public. Those sanctions appear on BrokerCheck, the watchdog’s free online service that investors can use to research stock brokers’ professional histories.

One reason for the change, FINRA has said, is to help investors steer clear of people who leave the brokerage industry but still give advice about money as financial planners and other types of advisers.

But Santos-Buch, who is now in the energy business, says the rule has hurt him and still does. Prospective employers who run is name through search engines such as Google or Yahoo see a result with the heading “DISCIPLINARY ACTIONS,” he says. It links to a 1997 monthly roundup of cases that FINRA posts in an archive on its website.

In his Feb. 2 lawsuit, Santos-Buch asked the U.S. District Court for the Southern District of New York to order FINRA to remove the disclosure from BrokerCheck and the reference to him in the disciplinary report.

The case hinges on several arguments, including that FINRA is violating Santos-Buch’s constitutional right to privacy. The continual publication of “personal disclosures” is a “willful, concerted and relentless assault on my reputation and well-being,” Santos-Buch wrote in a court affidavit.

Lawyers say the privacy argument is a creative legal approach to a sensitive issue for ex-brokers who settled disciplinary cases before FINRA imposed its permanent disclosure rule.

“There has been a tremendous frustration,” said Richard Roth, a New York lawyer who represents brokers in regulatory disputes. “One day everyone woke up, and their entire histories were there.”

FINRA has not yet responded to the lawsuit, and a spokeswoman for the regulator declined to comment. Lawyers say FINRA will probably try to get the case dismissed.

In an email, Santos-Buch declined to discuss his case and referred Reuters to his lawyer for comment for this story.

Santos-Buch also accused Thomson Reuters Corp TRI.TO of violating his privacy. He pointed to a copy of the 1997 FINRA disciplinary report that is publicly available on Compliance Complete, a Thomson Reuters publication.

A Thomson Reuters spokesman said the company published historical information about the securities industry that is available on FINRA’s website. He declined to comment further.


Santos-Buch, now 51, describes a long streak of employment opportunities that he says fell through because of FINRA’s disclosures. In 2006, for example, a life insurance company withdrew a job offer at the last minute.

“I have been literally excused from interviews, and one occasion thrown out of an office by a prospective employer,” Santos-Buch says in a court affidavit.

Santos-Buch eventually went back to school to learn the solar energy business, but says that even there the FINRA citations hurt his earnings ability.

He says he has been trying for years to get FINRA to remove the disclosures about him.

“We’re not saying that it’s bad to increase the disclosure period,” says McMenamin, his lawyer. “But to do this when a person is out of the industry in a completely different sector is punitive and a misapplication of the laws.”

While the privacy concerns that Santos-Buch raises are engaging, other arguments he makes may be more persuasive, lawyers say. For example, they say a judge may ultimately decide it is wrong for FINRA to apply its permanent disclosure rule to Santos-Buch retroactively, given how long ago his disciplinary case occurred.

Santos-Buch says a U.S. Supreme Court ruling forbids applying a law retroactively when that means sanctions against an individual may increase. He views his prolonged employment challenges as one such sanction.

“I think he has a very good argument that his case predated FINRA rules and disclosure issues and should not be disclosed,” said Tom Lewis, a Princeton, New Jersey, lawyer who represents brokers in employment disputes.

Such an outcome, however, would probably not apply to more-recent disciplinary cases, given a growing interest among regulators in making information about financial advisers broadly available to investors, Lewis said.

Even if Santos-Buch prevails, his problem may not completely go away, Lewis said, since old information continues to circulate on the Internet.

“I’m not sure there’s a way to help with the Google searches,” Lewis said.

(Reporting by Suzanne Barlyn; Editing by Linda Stern and Lisa Von Ahn)

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