Look up John O'Bannon of Diversified Financial Group on FINRA's BrokerCheck, and you'll learn something that might give some investors pause when considering him as a financial advisor.
According to his online records, he was fired from Edward Jones in September of 2020 after trying "to remedy a processing error in a client account by providing personal funds of the registered representative to the client."
From that site and in links that show up high in Google searches, it might seem as though O'Bannon was caught cutting a check to a client to keep a mistake from being reported. But that's not the case, he said.
At best, O'Bannon said, the words tell half the story. The check he wrote to his former client was to make up for possible losses from a stock sale that O'Bannon hadn't advised in the first place.
But even if O'Bannon's BrokerCheck record is misleading, as he contends, it's something he'll most likely have to live with.
"It paints a picture that sounds like this John O'Bannon guy is trying to make up for screwing over the client and help him cover these losses I've created," said O'Bannon, who now works in Diversified Financial Group's West Des Moines, Iowa, office.
O'Bannon, along with many like him, is caught in a sort of regulatory limbo. Some in similar situations are able to use a process known as expungement to remove reputational blots from their records. Others, however, haven't the time or resources to take their cases through these often-lengthy proceedings. Meanwhile,
Easy on
BrokerCheck — the online customer complaint and disciplinary database maintained by the Financial Industry Regulatory Authority, which regulates brokerages — is the official source for public information on many brokers' pasts. Just as damaging, though, can be Google searches calling up everything from online news sources to social media like Facebook and Twitter and online review sites Yelp!.
One of advisors' biggest gripes about the Financial Industry Regulatory Authority is over how readily the broker-dealer watchdog accepts customer grievances. Clients can go on FINRA's
FINRA insists allegations must meet certain
To be sure, serious complaints against brokers tend to be fairly uncommon. A recent report titled
But complaints involving far smaller sums also end up on BrokerCheck. And they have a way of complicating things for advisors who are trying to get on with their lives. Just ask O'Bannon.
Little things that kill
Before the COVID-19 pandemic, O'Bannon's record with FINRA was largely spotless. The only disclosure he had was for a personal bankruptcy in March 2014.
The early days of the pandemic found O'Bannon doing what most advisors were trying to do: work remotely without skimping on customer service. That's where he got in trouble.
In the spring of 2020, a long-time client asked O'Bannon about some stock-related paperwork that had arrived in the mail. Leery of having the client send him a photo of the documents and unable to review them in person, O'Bannon assumed they were meant to authorize a transfer of stock into the client's Edward Jones account. O'Bannon said he and the client had previously discussed just such a transfer. Still, O'Bannon cautioned, "I really have no idea what you are looking at."
The client went on to sign the documents. As it turned out, the client had unwittingly authorized a sale of the stock.
O'Bannon sent the client $2,678.50 as compensation for any appreciation in the shares' value that he might have missed out on. The client later called Edward Jones to verify the transaction had been done correctly. Edward Jones determined there had been an error, ended O'Bannon's employment and paid a $5,000 settlement.
Now when potential new clients come to his door, he adds his BrokerCheck record to the agenda of items to discuss, preferring to be upfront about it. Most seem to understand. But he knows it has cost him business.
"A lot of advisors have complaints against them, so it's not the end of the world," O'Bannon said. "But it does make a difference because you have to have another conversation to say: This is what actually happened."
O'Bannon said expungement would have been a dauntingly expensive prospect even before he was fired by Edward Jones. Estimating his income has gone down by about $100,000 a year since then, he said it looks even worse now.
Expungement, yes, but it'll cost you
O'Bannon's situation is a familiar one to brokers who think they've been unfairly tagged by regulators, said Doc Kennedy, the founder of the Denver-based firm AdvisorLaw. Expungement is out of reach for many because its cost can easily run into the tens of thousands of dollars. And then there's no guarantee of success.
FINRA bills expungement as an "extraordinary remedy" that's available only when accusations are "factually impossible, clearly erroneous or false" or directed against someone "who was not involved in the alleged misconduct." Of the 35,000 customer complaints that were entered into its records between 2015 and 2020, only 4% were removed.
Groups like the Public Investors Advocate Bar Association, which often represents investors in disputes with advisors, have conducted separate studies finding that expungement is granted 90% of the time when it is requested. In other words, advisors who are willing to take on the considerable costs and risks associated with asking for it, often get it.
The counter argument, though, is that because the expense and time commitments for expungement are so high, the only people who go for it are those who are almost guaranteed success.
PIABA nonetheless cites the high success rate as one reason for its support of a FINRA proposal to make expungement even harder to obtain. Among other things, FINRA has proposed allowing expungement to be granted only by the unanimous decision of one of its arbitration boards. The current rule instead allows for majority decisions.
Hugh Berkson, the president of PIABA, said the high success rate for people who ask for expungement suggests that the system is good at eliminating specious allegations.
"The fact is, if there is no merit to a complaint, it can be expunged," Berkson said.
But that's assuming that advisors have the resources needed to clear their names. And then there's the low bar to getting complaints posted in the first place.
Rob Herskovits, the founder of New York-based law firm Herskovits, said there are plenty of horror stories of unfounded complaints coming from ex-lovers who are out for revenge or former clients who are upset that an investment hadn't turned out as hoped.
"Any old nut job customer can file a complaint," said Herskovits, who represents advisors in cases before FINRA. "This person could be certifiably insane, and that complaint goes on the public record of the stock broker."
To be sure, FINRA notes in its BrokerCheck reports that it may list "pending actions or allegations that may be contested, unresolved or unproven. In the end, these actions or allegations may be resolved in favor of the broker or brokerage firm, or concluded through a negotiated settlement with no admission or finding of wrongdoing."
But Kennedy said he doubts many clients take the time to read that fine print. FINRA declined to comment further.
Check it out
The good news for O'Bannon and others in a similar predicament is that few prospective clients check BrokerCheck before choosing an advisor, said Jason Friedman, the CEO of the online advisor database AdvisorFinder. Although links to BrokerCheck now appear on many brokers' websites, Friedman has found that clients generally aren't in the habit of clicking on them.
BrokerCheck is useful for searching for the more than 600,000 securities professionals who come under FINRA oversight. The Securities and Exchange Commission maintains its own
Regardless of what type of financial planner clients are seeking, Friedman said, their preferred means of doing research is Google. Google will usually first produce some online ads, which potential clients will quickly dismiss. Next they'll come to the advisor's website, if there is one. As for social media, Friedman said clients are most likely to check LinkedIn, if anything.
Friedman said one of his goals in helping to found AdvisorFinder was to provide an easily searchable database of advisor names. Just as many restaurant-goers check Yelp! before trying out a new spot, Friedman wanted to see potential clients consulting AdvisorFinder for a sense of who might be out there to help them manage their money.
One Yelp!-like feature that Friedman is still a long way from adding, he said, is online reviews. Friedman said his reason for avoiding them is partly to stay on the right side of federal regulations, which remain ambiguous in some cases.
Until recently, for instance, the SEC had forbidden advisors to use client testimonials in their marketing. A
"They don't want to take that risk," Friedman said. "They're not quite ready yet."
Mike Garcia, senior consultant and director of strategic partnerships at the reputation management service Status Labs, said the best thing for advisors who are worried about unfair online criticism is to have a good web presence in the first place. Like many busy professionals, financial planners tend to be "terrible" at marketing themselves online, he said.
Garcia said advisors would do well to remember that carefully tended web pages and social media posts cannot be churned out overnight. And the last thing an advisor wants to do is rush to concoct a web persona in reaction to some negative headline.
If financial planners have been accused unfairly and later have their records expunged, Garcia said, old stories about their alleged misdeed can continue to haunt them. Some are tempted to try to combat these lingering clouds by trumpeting their exoneration as often and in as many ways as possible.
Garcia said that kind of dwelling on their vindication can be overdone. For one, it'll draw attention to the initial allegation for potential clients who might not have seen it in the first place.
"I have seen people go overboard and build websites shining a light on their exoneration," Garcia said."But that takes focus and effort, and it's better to spend your time building your business back up."
Lingering reputations
And sometimes a person who manages obtains vindication in a spectacular way will then gain a reputation as being a "difficult employee." Mark Munizzi, a former market operations supervisor in UBS's Chicago office, made headlines in December 2019 when he won the almost-unheard-of sum of $11 million in a wrongful termination case. Munizzi had lost his job at UBS after he was accused of failing to properly supervise two accounts that had lost significant value in February 2018 amid a wider market decline.
Munizzi was able to win not only $11 million from UBS — including $7.5 million in punitive damages — but also to have his BrokerCheck record changed to say he had been terminated "without cause." The only trouble was that he now had a reputation as a "difficult" employee, said Munizzi's lawyer, Steve Gomberg of Chicago-based Lynch Thompson.
Munizzi went on to fight UBS through two appeals in the courts. When it was all done, he ended up with even more money — $14 million. About $1 million of that went to his expungement fight. Fortunately, Gomberg said, by the time of the last court fight in November 2021, Munizzi was in his 60s and ready to retire. Another job in the industry, Gomberg said, would probably have been hard to come by.
"Any employment lawyer will tell you companies aren't going to hire someone who sued their former employer, notwithstanding if the suit had merit," Gomberg said. "If you have job candidates A, B and C, and C smacked his former employer with a $11 million award, who are you going to pick?"
