Brokerage firms and financial advisors recognize that customers may report a dispute with the Financial Industry Regulatory Authority (FINRA) at any time. Unfortunately, even baseless or inaccurate information can be reported to the Central Registration Depository (CRD) and made publicly available through BrokerCheck, damaging your professional reputation. In addition, FINRA uses the CRD to assist with investigations and disciplinary actions against financial industry professionals and firms. If you have been the subject of an unfair or downright false customer complaint, you have the right to seek an expungement request through FINRA. Below is a brief overview of the expungement request process and what steps you should take to defend your professional reputation.
What Information Appears on BrokerCheck
FINRA claims that its priority is to safeguard customers and markets from financial institutions or individual advisors engaging in deceptive, fraudulent, or predatory practices. This means that the authority errs on the side of the customer, allowing anyone to lodge a complaint about anything they deem to be a potential issue. By keeping the reporting requirements for customer dispute information broad and inclusive, the CRD system ensures that nearly all customer disputes can be reported and posted to BrokerCheck. Unfortunately, these general parameters often lead to false, irrelevant, or malicious customer dispute accusations, and the complainant need not provide any proof to support their claims. If you learn that a customer has made a complaint against you, your best option is to pursue an expungement request through FINRA to remove this false or misleading information from your BrokerCheck profile.
The Purpose of Expungement
FINRA recognizes that some customer dispute information may be inaccurate, so it allows financial advisors to pursue an expungement request to have customer dispute information removed in certain circumstances. According to FINRA, “The expungement framework seeks to balance the important benefits of disclosing information about customer disputes to investors and regulators with the goal of protecting brokers from the publication of inaccurate allegations against them.” Essentially, FINRA allows customer dispute information to be reported and made publicly available even without proof. Still, it also encourages brokers to seek an expungement if the posted information is false or misleading.
Initiating the FINRA Expungement Request Process
If you are ready to take action against an unfair customer complaint against you, you may initiate a request for expungement by contacting FINRA. You’ll participate in the arbitration process, where you will appear before a panel of three independent arbitrators to make your request. This panel will listen to your reasoning, examine any relevant evidence or documents, and decide whether to recommend expungement in the award. As this panel is made up of independent arbitrators, FINRA does not influence the outcome. If the panel recommends expungement, you’ll need to obtain a court order confirming the arbitration award and serve this document on FINRA.
An Alternative Route to Obtaining Expungement
FINRA also recognizes another path to expungement. If you want to bypass the process of appearing before an arbitration panel, you may initiate a proceeding directly in a court of competent jurisdiction. If the judge recommends expungement, you can serve the court order on FINRA at the conclusion of the legal process, and FINRA must honor the judge’s decision. If you are unsure of which route to take to obtain an expungement, enlist the guidance of a trusted securities law attorney to understand your options better.
Recent Changes to the Expungement Process
FINRA is constantly evaluating and amending its expungement rules in an effort to keep the public as safe as possible. Several recently proposed changes to the FINRA expungement request process have been made public, with many brokers and financial firms expressing concern over what they consider to be tighter restrictions on FINRA’s ability to grant expungement requests. Currently, the Securities and Exchange Commission (SEC) is reviewing these proposed changes. Below are just a few of the potential modifications FINRA could implement to the expungement request process.
Stricter Time Limits
If approved, this new rule would impose stricter time limits within which brokers may request expungement. This change would prevent brokers from requesting expungement after several years have passed (sometimes 15 or 20 years pass from when the dispute information was reported to the CRD system to when an advisor pursues an expungement request). Additionally, the rule would make it easier for multiple aged disputes to be bundled together into one expungement request.
Special Arbitration Roster
The proposed rule change would require arbitrators to become part of a Special Arbitrator Roster and agree to participate in enhanced expungement training. Straight-in requests would then be decided by this three-person panel, randomly selected from the roster of experienced public arbitrators with no significant ties to the industry.
Keeping Your Future Bright
As a broker-dealer, struggling with unfair customer dispute information posted to BrokerCheck can be frustrating and overwhelming. However, you do not have to endure this stressful period on your own. Reach out to a trusted and experienced securities law attorney to discuss your situation and determine the most strategic path forward. Together, you can take the necessary steps to defend your reputation from unfair allegations.
Call Judex Law, LLC, today at (303) 523-4022 to discuss your situation with a dedicated and friendly securities law attorney.
