Oft-Sanctioned Ex-Broker Kathleen Tarr Loses Expungement Request

By Jed Horowitz | March 29, 2017

The same day that an arbitrator last week completed a six-hour hearing on former independent broker Kathleen J. Tarr’s bid to expunge a customer’s complaint about allegedly unsuitable sales of privately-traded REIT sales from her regulatory record, he denied the request.

The decision, published on the Financial Industry Regulatory Authority’s online arbitration award site on Monday, is unusual because Tarr, who accumulated at least 42 customer complaints over her 12-year career at three firms, is challenging them and because Royal Alliance Associates, which employed her for eight years until her discharge in 2010, supported the expungement request, lawyers said.

Also unusual is that the customer, who settled the real estate investment trust case for $25,000 in December, according to Central Registration Depository (CRD) records, persisted in opposing Tarr’s expungement bid.

“The problem is that once a case is settled, few clients want to stick around to oppose expungement, and that lets bad brokers think they can get away with it,” said Bruce Oakes, a St. Louis-based lawyer who represented client Ruby Maddox in the REIT investments settlement and in the expungement hearing.

Oakes, who has successfully challenged four other expungement requests by Tarr, including one documenting a seven-figure award, said few lawyers or clients want to spend time or money on expungement challenges once awards are settled or decided.

“I hope if there are any other cases, other attorneys will fight it even if they are not compensated,” he said. “It’s important for the integrity of the CRD system.”

Paul W. Thomas, a Carlsbad, Calif.-based lawyer who represented Tarr, did not immediately return a call for comment. G. Thomas Fleming, a lawyer at Jones Bell Abbott Fleming & Fitzgerald in Los Angeles who represented Royal Alliance in the Maddox case, also did not return calls for comment.

Tarr’s BrokerCheck record is splotched with large red dots of “notifications” about complaints and employer actions, and the record excludes at least one case that has been expunged. Eleven of the 42 listed cases were settled or resulted in arbitration awards against her, one was closed with no action, 15 were withdrawn or denied, and 11 cases are pending, according to BrokerCheck.

A well-publicized arbitration panel’s decision in 2014 to expunge a complaint from Tarr’s record was vacated at the request of Finra by a federal district court and a California appeals court last year. Finra focused on fairness issues involving arbitrators’ refusal to take testimony from the customer rather than on the broker’s record.

Tarr began her career in 2000 with an almost two-year stint at Credit Suisse First Boston, but her records show no formal customer complaints until 2010. She was discharged from Royal Alliance in July of that year for violating firm policy requiring pre-approval of variable annuity transactions, according to BrokerCheck. She moved her license to SII Investments the day she left Royal, but has not been registered since leaving San Ramon, California-based SII in November 2012.

In an interview with The New York Times in 2014, Tarr said she may some day return to the brokerage business. She also told the paper that she does not feel she ever wronged a client.