One of the primary objectives of the Financial Industry Regulatory Authority (FINRA) is to protect the public from underhanded or exploitative actions by broker-dealer firms and individual financial advisors acting in bad faith. While there are instances of member firms engaging in these shady practices, FINRA’s approach to informing the public of such alleged activities takes the customer’s word at face value. Unfortunately, this means that inaccurate or even downright false customer dispute information becomes part of a financial advisor’s publicly available BrokerCheck profile and damages their professional reputation. If you need help removing misleading information from BrokerCheck, you have the right to file an expungement request with FINRA. However, FINRA has recently filed amendments with the Securities and Exchange Commission (SEC) to make the expungement request even more difficult to navigate, so it’s best to contact a skilled securities law attorney as soon as possible to ensure you understand what to expect from the process.
How Customer Dispute Information is Reported
When a customer has an issue with a member firm or financial advisor, they can report it via FINRA’s Complaint Program. This information is then entered into an online database called the Central Registration Depository (CRD). It’s important to recognize that the information in the CRD can also appear on BrokerCheck, FINRA’s publicly available online search tool that allows anyone to view profiles of brokerage firms or individual financial advisors. Unfortunately, FINRA does not investigate every complaint as it arises, which means that many brokers find that their profiles display inaccurate, baseless, or false information regarding customer disputes. In its mission to protect the public, FINRA assumes the validity of customer dispute information and leaves it up to the financial advisor to seek expungement.
Navigating FINRA’s Expungement Request Process
FINRA allows broker-dealers wishing to remove erroneous customer complaints from the CRD system through a process known as expungement. If the financial advisor can demonstrate that the customer dispute information is factually incorrect or false, FINRA will permit the complaint to be wiped from the CRD. This process has grown more cumbersome for broker-dealers in recent years—and stands to become even more selective in the near future—but here is a brief overview of the current FINRA expungement request process.
Making the Arbitration Request
First, you may file for arbitration through the FINRA Dispute Resolution Process. A panel of thirty independent arbitrators—who are initially randomly selected and then down-selected by the parties to a panel of three—will oversee the process. It’s important to note that FINRA has no part in the decision, as the panel of arbitrators has the power to award the expungement request.
Participating in Arbitration
You will appear before the panel of arbitrators to present your case. In order for the arbitrators to award your expungement request, you will need to demonstrate that one of the following is true: (1) The claim, allegation, or information is factually impossible or clearly erroneous; (2) You were not involved in the alleged investment-related violation, forgery, theft, misappropriation, or conversion of funds; or (3) The claim, allegation, or information is false. Once the arbitrators review the evidence and examine the case from all angles, they will issue a ruling.
Awarding the Expungement Request
Once the panel of arbitrators grants your expungement request, you must take this award to a court of competent jurisdiction for confirmation. The confirmed award must then be served on FINRA. FINRA only honors awards from the court, not from the panel. Alternatively, you may initiate a proceeding directly in a court of competent jurisdiction without going through the arbitration proceeding first. FINRA will take the confirmed award and remove the customer dispute information from the CRD.
Trusted Legal Guidance When You Most Need It
If your professional reputation is suffering because of misleading or baseless customer dispute information that’s available through BrokerCheck, you have the right to petition for its removal. Navigating the FINRA expungement request process can be challenging and confusing, but you do not have to go through it alone. Enlisting the guidance of an experienced and caring securities law attorney is the best way to ensure you identify and pursue the most strategic path forward. Your attorney will answer your questions, address your concerns, and support you during every step of the process. Now is not the time to let unfair information negatively impact your career—reach out to a trusted attorney today to explore your options.
If you need help pursuing a FINRA expungement request, call Judex Law, LLC, today at (303) 523-4022 to speak with an experienced and friendly securities law attorney.