FINRA Requests Comments on Proposed Amendments Related to the Expungement of Customer Dispute Information.

Last month, FINRA issued Regulatory Notice 17-42 requesting comments and proposing amendments to the procedures relating to the expungement of customer dispute information from the Central Registration Depository (“CRD”) system and FINRA BrokerCheck system.  The proposed amendments include significant substantive changes that impact the timing and procedures for reviewing expungement requests, including:

  • Requiring the associated person to appear at the hearing in-person or by videoconference (not telephonically);
  • Requiring a three-person arbitration panel to make a unanimous finding that expungement is appropriate under Rule 2080(b)(1) and that the “customer dispute information has no investor protection or regulatory value.”
  • Creating limitations on requests for expungements, including a one-year limitation period after an underlying customer arbitration settles to file an expungement request.  With regard to customer complaints, a one-year limitation period from the date the member firm initially reported the customer complaint to CRD.
  • Establishing a roster of public chairpersons with additional qualifications and training to decide expungement requests (Expungement Arbitrator Roster).

To read the complete regulatory notice, click here: Regulatory Notice 17-42 |   FINRA’s comment period expires February 5th.  For more information about expungements, please contact our office for a complimentary consultation.

Ghabai Law Group LLC Launches New Firm in Boston’s Financial District Focused on Representing Financial Services Firms and Professionals

Boutique Law Firm Combines Sophisticated Cost-effective Legal Counseling with Sound Practical Judgment And Hands-on Business Experience

Boston, April 20, 2017 (PR Newswire) – N. Nancy Ghabai, former Senior Vice President and Associate General Counsel for LPL Financial LLC, has launched Ghabai Law Group LLC. The new firm represents financial services firms and professionals in arbitration, litigation and regulatory matters nationwide.

For more information on the firm’s practice areas, click

Under Ghabai’s leadership, the firm provides clients with a unique combination of sophisticated counsel that is the hallmark of larger firms, with the personal service, responsiveness and cost effectiveness of a boutique firm. Over the past 15 years, Ghabai, a financial services veteran attorney, has earned a reputation for representing her clients vigorously and professionally by implementing tailored solutions grounded in sound legal expertise.

“Ghabai Law Group is committed to providing our clients with sophistiated cost-effective legal counsel that is routed in sound practical judgment that comes from hands-on business experience,” said Nancy Ghabai, Founder and Managing Partner. “Whether it’s navigating the FINRA arbitration process, responding to a regulatory inquiry, or negotiating with an adversary, our expertise, insight, judgment and dedication are focused on delivering favorable results for our clients.”

“Our unwavering approach to service is simple – work smarter and harder to give each client the attention and high-quality work product that they deserve,” concluded Ghabai.

Ghabai is an experienced litigator and previously served as as Senior Vice President, Associate General Counsel for LPL Financial LLC since 2005. There, she represented financial advisors and registered investment advisors in all aspects of their business, serving as a problem-solver, advocate and trusted counselor. Ghabai’s extensive experience includes defending customer-initiated securities arbitrations and industry arbitrations before FINRA, representing financial professionals in formal and informal regulatory inquiries, investigations and enforcement actions brought by state and federal regulators, and providing counseling on a range of business and compliance issues.

Ghabai received her J.D., cum laude, from Suffolk University Law School, where she served on the Suffolk Transnational Law Review. Ghabai received her B.A. in Political Science and American Literature from the University of Vermont. Ghabai holds a Series 7 General Securities Representative License.

For more information on Ghabai Law Group LLC please visit

Nancy Ghabai, Esq.
Founder and Managing Partner

Status Report on FINRA Dispute Resolution Task Force Recommendation: February 8, 2017 Status Report

There are several proposals in various stages of the rulemaking process, including a rule that would provide for the expedited resolution of small customer and intra-industry disputes in claims involving $50,000 or less.  Another pending rule includes FINRA notifying state securities regulators when brokers make a request for expungement relief.  The SEC previously approved two proposals involving the selection of all public panels and the rules governing motions to dismiss, which became effective in January 2017.

Read FINRA’s February 8, 2017 Status Report »

The headquarters of the U.S. Securities and Exchange Commission (SEC) are seen in Washington, July 6, 2009. REUTERS/Jim Bourg

U.S. appeals court rejects SEC’s use of administrative law judges

Reprinted from Reuters

A divided federal appeals court has ruled that the U.S. Securities and Exchange Commission’s in-house administrative judges are not constitutionally appointed, raising the prospect that the U.S. Supreme Court may need to address the issue.

The ruling by the 10th U.S. Circuit Court of Appeals in Denver in the case of Colorado businessman David Bandimere marked a major setback for the SEC amid attacks by defendants who question the fairness of its administrative court system.

The holding on Tuesday marked a departure from the U.S. Court of Appeals for the District of Columbia Circuit, which in August upheld the SEC’s use of in-house judges. The Supreme Court often reviews matters where circuit courts are split.

David Zisser, Bandimere’s lawyer, on Wednesday said he was “delighted” by the ruling. The SEC said it was reviewing the decision.

Administrative law judges are independent from the agencies where they work. Their employing agency can seek their removal, but the Merit Systems Protection Board must review such a move.

Following the 2010 Dodd-Frank law’s passage, the SEC relied increasingly on its own judges to oversee cases. Critics call the fast-tracked in-house court unfair to defendants, some of whom have challenged the system in court.

In Bandimere’s case, the SEC accused him of acting as an unregistered broker from 2006 to 2010 in making sales of securities in two entities that enabled Ponzi schemes. He denied wrongdoing.

Administrative Law Judge Cameron Elliot in 2013 found Bandimere liable for violating securities laws, barred him from associating with any broker, dealer or investment adviser and ordered him to pay nearly $1.03 million.

But in Tuesday’s ruling, U.S. Circuit Judge Scott Matheson said Elliot and the SEC’s other four in-house judges held their offices in violation of the U.S. Constitution’s appointments clause.

Writing for the 2-1 majority, Matheson said the SEC’s in-house judges were not employees but “inferior officers” who had not as required been appointed by the president, a court or a department head.

The SEC’s commissioners, who heard the initial appeal of Elliot’s 2013 ruling, previously held the in-house judges were not inferior officers because they issued non-final decisions subject to commission review.

But Matheson said that fact “does not transform them into lesser functionaries.”

In a dissent, U.S. Circuit Judge Monroe McKay expressed concern the “sweeping” holding had “effectively rendered invalid thousands of administrative actions” through its potential impact on in-house judges at agencies beyond the SEC.

The case is Bandimere v. U.S. Securities and Exchange Commission, 10th U.S. Circuit Court of Appeals, No. 15-9586.

(Reporting by Nate Raymond in New York; Editing by David Gregorio)

Court rejects emergency injunction to block DoL fiduciary rule

Reprinted from

A federal appeals court has rejected an annuities trade group’s request to postpone the implementation deadline for Department of Labor’s fiduciary rule, the latest legal setback for opponents of the controversial regulation.

A three-judge panel at the U.S. Court of Appeals for the D.C. Circuit denied the National Association for Fixed Annuities’ emergency motion to delay the rule, concluding that the group “has not satisfied the stringent requirements for an injunction pending appeal.”

That move follows NAFA’s defeat at a U.S. district court in its bid to overturn the rule, which the group has called an “onerous regulation” that threatens to “jeopardize the future of American retirement.”

Industry members hostile to the new regulation have roundly criticized it as unworkable, and firms have responded in a number of ways, including announcing plans to bar IRA commissions or to establish a dual-track system that retains commissions for large clients but moves smaller investors into fee-based accounts, as Stifel has announced.

NAFA Executive Director Chip Anderson did not immediately respond to a request for comment on the court’s decision or the prospects for the fiduciary rule going forward.

However, when Anderson’s organization filed its emergency motion for an injunction to stay the DoL’s rule for 10 months beyond the scheduled April implementation date, he argued that the regulation was already creating a major compliance burden for his group’s member firms.

“With every passing day NAFA members are incurring excessive and unrecoverable expenses as they attempt to navigate the rule’s byzantine compliance regime,” Anderson said at the time.

“Without this injunction, even if NAFA ultimately prevails on the merits of the case, a win on appeal will only be a Pyrrhic victory,” Anderson said. “The DoL’s dangerous overreach and creation of such an unworkable regulatory landscape poses a glaring and immediate threat to NAFA membership and those it serves as they struggle to address a sea of unknowns and the potential for an environment fraught with private action.”

With the rejection of NAFA’s bid for an injunction, the annuities group could either appeal the ruling to the full D.C. Circuit in an en banc proceeding, or endeavor to bring the matter before the U.S. Supreme Court.

“It’s hard to say what the future will hold for the DoL rule in the other courts,” says Duane Thompson, senior policy analyst at fi360, a fiduciary training firm. “Right now it’s one down, three to go. The only thing that I think could stop the rule completely in its tracks would be a district court decision vacating the rule. This is still a long shot.”

Of course, all of those legal challenges now sit in the shadow of the incoming administration of Donald Trump, who has tapped fast food executive Andrew Puzder to head up the Labor Department. The Trump administration, as well as the Republican-led Congress, is widely seen as likely to take action to delay the regulation or kill it altogether, and industry groups like SIFMA have already signaled their plans to step up lobbying efforts to dismantle the fiduciary rule and other government actions that they oppose.

“I think the most likely outcome for the rule will not be in the courts, but through an executive order by the incoming Trump administration delaying the April 10th compliance deadline, and then undertaking a new rulemaking to either withdraw the current rule or otherwise making significant changes,” Thompson

FINRA fines Credit Suisse over anti-money laundering policies

Reprinted from Reuters

The Financial Industry Regulatory Authority said on Monday it has fined Credit Suisse’s U.S.-based securities business $16.5 million for ineffective anti-money laundering programs.

FINRA, the securities industry self-regulator, found that Credit Suisse Securities (USA) LLC relied on its brokers to identify and report suspicious trading, which did not always happen.

FINRA also found the effectiveness of its automated system used to monitor suspicious transactions was impeded because many of the data feeds were missing information.

FINRA was careful to say it did not find that Credit Suisse or any employees committed fraud or deceptive acts.

A Credit Suisse spokesman said the bank was pleased with the settlement.

“We cooperated with FINRA’s inquiry and have been taking appropriate internal remedial efforts,” a spokesman said.

The bank neither admitted nor denied the charges.