[ by Howard Haykin ] A California broker, seeking to erase from his CRD files past public disclosure reports, may be well on his way to fulfilling his wish, based on last week's decision by a California appeals court. Edwin "Mike" Lickiss, a broker since 1977, has been with Alamo, CA-based Investments Architects, Inc. since 1996.  He's suing to old blots on his records expunged - because he says they reveal old and irrelevant details that unfairly hurt his livelihood.  He resorted to legal action because FINRA typically will not "clean up" or expunge the records unless the information is somehow wrong or false. And, when it comes to expunging certain arbitration complaints, as Mr. Lickiss seeks to do, FINRA's expungement procedures, until recently, made it difficult for some brokers to even request removing.  For years brokers had complained that disclosures are nearly impossible to get removed through FINRA's expungement arbitration process, one lawyer said. Court of Appeals Ruling. The ruling will let a judge invoke unusually broad authority in deciding whether to erase details about more than a dozen arbitration complaints from Lickiss' record, all based on what a court decides is simply the fair thing to do. The judge doen't have to abide by FINRA's rigorous standards. The case could have the greatest impact on many of California's 285,000 licensed brokers, although it could potentially have wider influence on courts in other states, lawyers say.  About 45% of the nation's 630,000 securities brokers are licensed in California. Been a Long Road to Hoe. It's been 18 months since FINRA first challenged Lickiss's efforts and sought to get it thrown out.  That didn't happen, but then Lickiss has to start the process all over again - convincing a lower court judge to order a clean-up of his record. Lawyers who represent aggrieved investors are concerned about the consequences. Conduct, and not the age of a complaint, is what matters, they say.  Yet, judges outside of the securities industry may not accurately interpret events that played out long ago and harmed investors.

"It becomes a dangerous precedent for investors who rely on disclosure records to ascertain who to do business with." -- Steven Caruso, NY-based securities arbitration lawyer, who's not involved in the case.

Jeffrey Salisbury, who is representing Lickiss, countered:  a court's review would protect investors while allowing "deserving brokers" to have "inappropriate blemishes removed from their public records." The Broker's Past Problems. Mr. Lickiss' problems started in 1986, when he worked for a predecessor of the brokerage unit of LPL Financial Holdings Inc. and started selling stock in a REIT, Commonwealth Equity Trust.  The REIT was initially well-managed but took on too much debt in 1991, just as California commercial real estate slumped.  It filed for bankruptcy after its manager absconded with $7.2mn in cash. Lickiss was hit with 17 arbitration complaints, mainly for REIT investments customers had purchased between 1987 and 1991.  They charged that Lickiss had not disclosed the risks.  Details of those complaints, most of which were settled, still appear in his CRD files although Lickiss argues he was not to blame for the problems - according to court papers.  He points out that his record was clean until the REIT failed and "beyond reproach" since, except for a "small" incident involving a $10,000 note he bought as an investment for a customer without his firm's approval. For that he was fined $8,500. Of course, the CRD report contains certain disclosures that can be viewed as questionable - e.g., he was "permitted to resign" in 1995 for privately settling a complaint without his firm's knowledge. Best Shot at Expungement. Lawyer James Sallah, who practices in Boca Raton, says that a broker's records which were tainted by claims stemming from entire classes of failed securities may offer the best shot at convincing a judge to order expungement.  That would apply, for instance, to arbitrations involving auction rate securities that became illiquid in 2008.  Those securities were sold for more than a decade by advisers with few problems before imploding in early 2008.

[C-I Note: Beware - a win by Mr. Lickiss just might open the floodgates, in California, at least.]

For further details, go to:   [Reuters, 8/30/12].