Court Ruling Tightens Investors' Safety Net

It's easy to see why brokers who have run-ins with investors shouldn't be allowed to expunge their records, even in cases where a complaint was settled with no finding of fault or misdeed.

"The court agreed with us that the state has an absolute right to protect its interests and those of its citizens from a broker's attempt to expunge records of proved or alleged professional misconduct," Maryland Attorney General Douglas F. Gansler said of the appellate decision.

NASAA also applauded the ruling.

The decision helped "protect the integrity of [Maryland's] public records from being weakened by brokers seeking to create the impression of a clean slate by removing negative information from their disciplinary histories," said Karen Tyler, North Dakota securities commissioner and president of NASAA.

Removing information from the registration depository has been a concern to state securities regulators, Lubin said. Records can be wiped clean only if the complaint is found to be false or erroneous, or if the wrong person was named in a complaint. The rule was put in place to ensure regulators would get the full story of a broker's history in working with investors.

Understandably, people get upset when they lose money. Some investors complain about losses even when nothing inappropriate was done. However, if broker records can be so easily expunged, state securities regulators won't be able to accurately rely on information in the depository. With so many inexperienced investors, it's crucial that regulators have information on all disciplinary proceedings and arbitration claims. Otherwise, how will they be able to detect a pattern of bad behavior by a broker or firm?

"It's important that the records be preserved so regulators can do their jobs, and so investors can make a decision on whom to do business with," Lubin said.

Kudos to Maryland officials for fighting to keep the national broker licensing and registration system transparent. I certainly hope other state securities regulators do the same.

· On the air: Michelle Singletary discusses personal finance Tuesdays on NPR's "Day to Day" program and athttp://www.npr.org.

· By mail: Readers can write to her at The Washington Post, 1150 15th St. NW, Washington, D.C. 20071.

· By e-mail:singletarym@washpost.com.

Comments and questions are welcome, but because of the volume of mail, personal responses are not always possible. Please note that comments or questions may be used in a future column, with the writer's name, unless a specific request to do otherwise is indicated.