In November of 2013, Finra released an enhanced version of its BrokerCheck Report. It now includes a graphical timeline of disclosure events such as criminal convictions, customer complaints, lawsuits, and regulatory actions. Disclosure events appear as red dots along the time line. Long blue lines reflect time periods during which the broker was registered with a broker-dealer.
Bernard Madoff’s BrokerCheck report is rather striking in the new format. It contains a single long blue line representing an unblemished run of 49 years with his broker-dealer. In 2008, however, he picks up seven disclosure events depicted as seven red dots stacked on top of each other. Here is an excerpt of the chart from finra.org:
Each disclosure event is summarized later in the report. One of the disclosures is his criminal case. BrokerCheck notes that Madoff pled guilty to eleven felonies and received a 150-year sentence. But that’s not all. BrokerCheck’s summary leaves nothing out:
“upon release from imprisonment, the defendant shall be on supervised release for a term of 3 years on each count to run concurrently.”
The discerning investor, in vetting potential brokers, will no doubt detect the leniency afforded to Mr. Madoff by allowing his 3 years of supervised release to run concurrently on each count following his 150-year sentence. If he were truly a bad apple, a savvy investor might reason, his supervised release would run consecutively on each count.
The other six disclosures include the SEC civil case freezing his assets, the receivership placed upon his broker-dealer, and the revocation of his state securities registration by the great states of Illinois, Washington and Alabama.
Interestingly, there are no customer complaints on his BrokerCheck. That’s kind of funny if you think about it. Ordinarily those would each garner a red dot. And there are no customer lawsuits either. Now that’s not to say that Madoff’s customers were a satisfied lot. No, what’s happening here is Finra generally does not undertake to update BrokerCheck reports for those no longer registered. So we wondered what his report might look like if we tried to get at least his civil lawsuits on there. Counting the lawsuits is tricky. It’s almost easier to count those who have not sued Madoff. Anyway, here’s our visual approximation of what that might look like:
That’s hard on the mouse wheel to be sure, but it gives you the idea. Putting his permanent bar aside for a moment, such a BrokerCheck would present a formidable barrier to being hired at a broker-dealer upon his release from prison. That, and he’ll be over 220 years old.
Published by Jeremy L. Bartell
Financially Regulated is published by Jeremy L. Bartell, a long-time admirer of Wall Street and its interesting cast of regulators. Jeremy is an attorney with Bartell Law in Washington D.C. He represents financial professionals nationwide in Finra inquiries and investigations, Finra arbitration, securities employment disputes and registration and disclosure matters.