Reuters: Regulatory News: COMPLY-Erasing the past is no simple feat for ex-brokers

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COMPLY-Erasing the past is no simple feat for ex-brokers May 4th 2012, 16:38 By Suzanne Barlyn Fri May 4, 2012 12:38pm EDT May 4(Reuters) - Twelve years ago, Bruce Buscetto could not imagine that a securities regulator's disciplinary case against him would someday prevent him from holding on to his executive job in another industry. For brokers, his is a cautionary tale that disciplinary problems can come back to haunt them. Think twice before considering a settlement. Keep in mind that even an agreement that does not admit wrongdoing can derail a future job. Buscetto's troubles began in 2000, when he was barred from the securities business in a settlement with Wall Street regulators who said he had misrepresented investments to customers. The case goes back even further, to the early 1990s, when he worked as a branch manager for Hibbard Brown & Co, a brokerage that was ultimately expelled from the industry for defrauding customers. Buscetto started fresh, building a successful career in healthcare. He eventually became head of the largest business unit of pharmacy benefit manager SXC Health Solutions Corp's , according to court documents. But Buscetto was demoted in 2010 after the company had trouble getting a license it needed from Florida insurance regulators because of his securities industry bar, according to court documents. The regulators later decided not to require the license, but Buscetto did not get his old job back. A spokesman for Lisle, Illinois-based SXC declined to comment. Buscetto's case highlights the growing -- and unexpected -- long-term challenges that some ex-brokers face as they try to move forward in a new industry after a disciplinary settlement. A key issue that brokers need to consider is that their regulatory information is both permanent and widely circulated. For starters, some regulators for other industries, such as insurance, have easy access to securities industry records for current and former brokers. Then the Financial Industry Regulatory Authority, Wall Street's self-regulator, changed its rules in 2009, making information on bars and other sanctions against brokers who leave the industry available to the public through BrokerCheck, its free, searchable online database. The permanent records, while intended to protect investors from unknowingly seeking advice from a barred individual, can lead to unfair consequences for ex-brokers trying to redeem themselves in other industries, lawyers say. Now FINRA is considering whether to include even more information in BrokerCheck, such as brokers' educational backgrounds and scores on licensing exams. "This whole area has gotten totally out of control," said George Brunelle, a New York-based lawyer who represents brokers. PERMANENT ETCHING The potential consequences of a disciplinary case should be enough motivation for brokers to stay out of trouble. But the reality is different: FINRA filed 1,411 disciplinary actions against brokers and brokerages in 2011 alone. The cloud of controversy about a disciplinary action itself can pressure some brokers to agree to a suspension or a bar just to end the process quickly. Most brokers would be better off taking time to think about the repercussions of what they are signing. Making a new start in a field that requires a license, such as real estate and insurance, can be particularly challenging. Besides FINRA's permanent securities records, past successes and misdeeds are easily found on the Internet. "You can pretty much find out whatever you want," said Peter Ronza, president of Pontifex Consulting Group LLC, a human resources consultancy in Blane, Minnesota, that is not involved in the Buscetto case. Employers have become more fastidious about background checks in general, but scandals that have transformed corporate America have also made companies more cautious about whom they hire and promote, said Donna Boehme, principal of Compliance Strategists LLC in New Providence, New Jersey. "I think companies have gotten the memo that they have to scrutinize people in positions of authority," Boehme said. The technology used to do that "has completely changed the manner in which a bar in one industry may have entirely unintended collateral consequences in other industries," Buscetto's lawyers wrote in court papers filed in a lawsuit against FINRA. For instance, a Google search reveals a regulatory newsletter from 2000 that reported Buscetto's settlement. Buscetto wants a judge to overturn the 2000 order from FINRA's predecessor barring him from the industry. In his 2000 settlement, he neither admitted nor denied the allegations against him. He declined comment through his lawyer. FINRA is trying to get the Buscetto case thrown out, arguing that he has no right under federal securities law to request the relief. Since he voluntarily settled his case, he cannot ask for a "do over," FINRA's lawyers wrote in court papers. A FINRA spokesman declined to comment. A federal judge is still reviewing arguments in the case, which Buscetto filed in late October. Lawyers who represent brokers are not optimistic that he will win or that those in similar situations can expect courts to help them. But they hope the case will shed light on the outcome of FINRA's permanent disclosure practice for ex-brokers who want to redeem themselves. And for brokers, it is a lesson in why it pays to avoid trouble in the first place. Link this Share this Digg this Email Reprints

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