A new study from the nonprofit PIABA Foundation will expose a troubling and large-scale pattern of abuse of the "expungement" process that brokers can use to erase investor disputes from public records. Reviewing the handling of nearly 2,200 investor complaints between 2015 and 2018, the PIABA Foundation finds the expungement system is being manipulated by brokers, attorneys, and brokerage firms to eliminate references to misconduct, cut out investor input, and rig the process so that brokers can wipe away past abuses resulting in the avoidance of more than $8,000 in costs per filing that have led to FINRA subsidizing often bogus expungement proceedings by about $6 million.

in which investors are largely sidelined allows brokers to present false and misleading information in order to erase their misconduct.  Not only does what has degenerated into a "get out of jail free" process make a mockery of FINRA arbitration, it also destroys, among other things, the reliability of the FINRA BrokerCheck system, which investors are urged to consult to learn about the background of brokers and brokerage firms. The report will outline a range of major steps that must be taken immediately to halt the growing problem of abuse of the FINRA expungement process.  (Recent minor adjustments made by FINRA to the expungement regimen do not begin to address the fundamentally flawed and widely abused process.)

• FINRA should halt all expungement proceedings immediately and impose a moratorium on the filing of Expungement-Only cases until procedural safeguards are put into place to correct the problems identified in this Study;
• FINRA should commission an independent outside investigation of whether expungements have been granted based upon false and/or fraudulent information;
• FINRA's BrokerCheck and the state sponsored-FINRA Central Registration Depository (CRD) should carry a prominent warning that they are unreliable inasmuch as they do not include all customer complaints because expungement may have resulted in the removal of pertinent information; and
• The SEC or FINRA should establish an Investor Protection Advocate who would be named as a party in every expungement proceeding to ensure the integrity of the process.

conspired and engaged in a coordinated stock manipulation scheme that artificially influenced the prices of publicly traded securities by making others in the market believe that there was trading interest and activity in particular stocks.  In reality, no such interest or trading activity existed, and the defendants profited from the price movements they caused. 

The alleged scheme targeted "thinly-traded" securities, which are securities with a low trading volume that are volatile and highly responsive to buying/selling activity.  The defendants are alleged to have placed (or coordinated the placement of) thousands of non-bona fide purchase/sell orders in order to move stock prices up or down.  After the prices moved and the defendants purchased/sold the securities at the artificially higher/lower prices, the initial orders were cancelled.  Defendants and their co-conspirators are alleged to have profited millions of dollars as a result of the stock price spoofing scheme.  

[F]rom 2011 through 2014, Migliorato was responsible for the firm's compliance with these requirements of pre-release. Under Migliorato's watch, personnel on ICBCFS's securities lending desk failed to take reasonable steps to determine whether the proper number of foreign shares were owned and held by ICBCFS or its customers. This failure opened up the possibility that the ADRs could be used improperly for short selling or dividend arbitrage.

In my view, what we now have in our public markets is a festering wound that, if left untreated, could metastasize unchecked and affect the entire system of our public markets. The question, then, is what can be done to avoid the inevitable reckoning.

We on the investor side need to start by being honest with ourselves. As much as we may want to talk about the stock exchanges and their race to the bottom with their listing standards-and trust me, I have talked about it -- we need to acknowledge that investors themselves have engaged in their own race to the bottom when it comes to corporate accountability to shareholders. Investors, and particularly late-stage venture capital investors with deep pockets, have been willing to pay astronomical sums while ceding astonishing amounts of control to founders. This means that other investors, in order to deploy their own capital, must agree to terms that were once unthinkable, including low-vote or no-vote shares. The end result is a wave of companies with weak corporate governance.

convicted felon Eric J. "EJ" Dalius and the companies he controlled under the umbrella name "Saivian" engaged in a scheme to defraud when they sold securities that entitled investors to receive 20% cash back on their shopping purchases in exchange for paying a fee of $125 every 28 days, and submission of receipts. In its amended complaint, the SEC charges Evans with taking actions and making material misstatements in furtherance of the scheme. The amended complaint alleges that defendants Dalius, Evans, and the Saivian companies falsely claimed that Saivian funded its cash back payments to investors by selling receipt data submitted by its members. Instead, the defendants operated a Ponzi scheme in which they paid returns to investors from the funds of later investors, rather than through legitimate business activity. The amended complaint also alleges that the defendants engaged in an illegal pyramid scheme when they promised a daily residual income stream for affiliates who sold Saivian memberships to downline recruits. The SEC also alleges Dalius concealed his control of the Saivian scheme and failed to disclose his prior criminal conviction in connection with an earlier multi-level marketing fraud.