Professionals throughout the financial industry have likely heard about the numerous changes that the Financial Industry Regulatory Authority (FINRA) recently enacted, many of which concern the expungement of customer dispute information process. These amendments went into effect on October 16, 2023, and many member firms and individual brokers are still discovering the nuances of these changes and the real-world implications they will have on FINRA’s expungement request process. As with any new policy or rule changes, FINRA’s revisions may take some time to understand in their entirety. According to FINRA’s latest newsletter, FINRA just updated the Key Topics section of the Expungement of Customer Dispute Information web page to reflect the newly adopted changes. Additionally, FINRA added a new web page as a resource for those looking for answers to common questions about the rule changes and their implications. This FAQ page provides detailed information about many of the rule changes affecting the expungement request process, allowing customers, member firms, individual advisors, and members of the public to access relevant information pertaining to these topics. Although the responses can be helpful, you may require more detailed information that’s tailored to your specific situation. Let’s take a look at how FINRA has answered some of these common questions and explore how enlisting the guidance of a highly qualified securities law attorney can help you make more informed decisions with greater clarity and confidence.
Understanding the FINRA Expungement Process
FINRA allows associated persons (i.e., brokers or financial advisors) to seek the removal of customer dispute information from the Central Registration Depository (CRD), which also appears on the individual’s BrokerCheck profile. Since FINRA sees its role as protecting the public from member firms or individual securities professionals acting in bad faith, it allows customers to file complaints without investigating the validity or accuracy of the customer dispute information. Unfortunately, this means that exaggerated, inaccurate, or even downright false information may appear on the publicly available BrokerCheck profile, negatively impacting a financial advisor’s professional reputation. To account for the possibility of false customer dispute information appearing in the CRD and on BrokerCheck, FINRA offers financial advisors the opportunity to file an expungement request to have such information removed from the CRD. Here are the core requirements and stages you can expect from the FINRA expungement request process.
When a FINRA Expungement Request is Justified
FINRA recognizes only a narrow set of circumstances in which the expungement of customer dispute information may be justified (and therefore awarded). The panel of specially trained, independent arbitrators must find that the request for the expungement has provided sufficient evidence supporting one of three grounds for expungement relief: “(1) The claim, allegation or information is factually impossible or clearly erroneous; (2) The associated person was not involved in the alleged investment-related sales practice violation, forgery, theft, misappropriation or conversion of funds; or (3) The claim, allegation or information is false.” If the panel of arbitrators determines that the associated person has presented sufficient evidence of one of the above grounds for obtaining expungement relief, the panel will issue an award granting the request.
Putting the Award into Effect
Once the panel issues an award granting you the expungement relief you are seeking, you must have this award confirmed and authorized by a court and present the court order directing the expungement of the information to FINRA. Once FINRA receives the court order, the customer dispute information will be removed from the CRD and BrokerCheck. Alternatively, you may take the matter directly to court. If the court orders the expungement of the information, you can present this court order to FINRA, and it must comply with the expungement order. Whichever path you take, it’s highly advisable that you enlist the guidance of a dedicated and experienced securities law attorney to help you move through each step of the process with confidence.
New Rules Impacting How to Expunge Customer Dispute Information
As of mid-October 2023, FINRA’s new rules impacting the expungement of customer dispute information process have taken effect. These amendments aim to minimize the number of expungement requests made in bad faith, or that seek to expunge information that FINRA believes the public should be able to access. For example, FINRA has imposed stricter time limits during which an associated person may file an expungement request. Under these amended rules, “If the request is included in the answer, it must be filed within 45 days of the receipt of the customer’s statement of claim in accordance with existing requirements under the Customer Code. If the AP requests expungement in a separate pleading, rather than the answer, that pleading must be filed no later than 60 days before the first scheduled hearing begins.” In other words, there are strict rules governing how much time an associated person has to file an expungement of customer dispute information request.
Perhaps the most notable amendment to FINRA’s expungement request process concerns the Special Arbitrator Roster. Essentially, straight-in requests must be decided by a panel of three independent arbitrators. Under the enhanced rules, the panel is randomly selected from the Special Arbitrator Roster (which contains vetted, qualified, and experienced arbitrators who have received specialized training to serve in this capacity). Expungement relief may only be granted if the three arbitrators unanimously agree to award expungement based on the narrow grounds specified in the rules. If you are hoping to pursue expungement relief, it’s important to work with a knowledgeable and highly experienced securities law firm to ensure that you understand the enhanced rules and how they may affect your case.
Get Started With a FINRA Arbitration Attorney Today
The prospect of seeking an expungement of customer dispute information request can seem daunting. However, you do not have to go through this intimidating process on your own. Enlisting the support of an experienced securities law attorney is the best way to move forward with confidence. Over the years, attorney Tosh Grebenik has defended professionals in the financial and securities industries from customer complaints and has secured expungements of wrongful complaints. He’s fully prepared to help you identify the most strategic path forward to maximize your chances of obtaining your desired outcome.
If you have questions about FINRA’s newly enacted rules regarding the expungement of customer dispute information, reach out to Judex Law, LLC, today at (303) 523-4022 to speak with an experienced and friendly securities law attorney.
