As a financial institution or securities advisor, you are well aware of the sweeping changes enacted by the Financial Industry Regulatory Authority (FINRA) a few years ago. As of October 16, 2023, new rules imposing stricter time limits for straight-in requests, establishing a roster of qualified arbitrators, and many other changes went into effect. Now that some time has passed, it’s worth taking a look at how these amendments to FINRA’s rules have affected the expungement process for financial advisors seeking to have unfair customer complaints and dispute information removed from the Central Registration Depository (CRD) and BrokerCheck.
Since FINRA’s core mission is to “protect investors and safeguard the integrity of our vibrant capital markets to ensure that everyone can invest with confidence,” this regulatory body adopted a series of amendments to limit the number of successful expungement requests, ostensibly to protect the investing public from financial firms and individual brokers acting in bad faith. However, customer dispute information can appear on BrokerCheck (a publicly searchable database) without an investigation to confirm the validity of the complaint, which means that financial advisors can find themselves suffering reputational damage due to a baseless, inaccurate, or downright false customer complaint. Today, let’s take a look at how the recent changes to FINRA’s rules has impacted the FINRA expungement request process and the overall FINRA expungement success rate, as well as how enlisting the guidance of a highly experienced and trusted securities law attorney can help you identify and evaluate your options for defending your professional reputation and livelihood from unfair and baseless complaints.
Revisiting the Most Notable Amendments to FINRA’s Rules
When the Securities and Exchange Commission (SEC) approved FINRA’s proposed rule changes, these amendments addressed a wide range of policies and procedures. One major area that saw a significant number of changes was FINRA’s Dispute Resolution Services (DRS), which oversees mediation and arbitration proceedings. In an effort to limit the number of successful expungement requests, FINRA imposed stricter time limits for filing expungement requests, created a three-arbitrator requirement for granting expungement relief, and now requires the panel of arbitrators to unanimously grant expungement relief. Additionally, the expungement process has become more interactive, as state securities regulators are encouraged to participate in these matters.
How New FINRA Rules Have Affected Expungement Success Rates
According to some of the most recent case filings and trends released by FINRA since the implementation of the amended rules, “Brokers who filed straight-in requests seeking to clear complaints that had already been resolved were successful in about 66 percent of cases.” However, “Although brokers still won the majority of cases, the rate is far from the sky-high success that they could expect under the previous rules. Prior to expungement reforms, plaintiff lawyers and investor advocates had claimed that brokers were winning as many as 90 percent of straight-in expungement cases.” It’s clear that the stricter rules, tighter timelines, and newly enacted limitations have contributed to a drop in successful expungement requests.
How Are Financial Advisors Reacting to FINRA’s Newest Expungement Rule Changes?
As financial advisors struggling with unfair customer dispute information on their BrokerCheck profiles see the effects of FINRA’s newly amended rules and restrictions, they are turning to legal professionals for guidance. Many securities professionals are deciding to move away from FINRA’s arbitration forum and taking their expungement requests to civil court or alternative dispute resolution forums, like the American Arbitration Association (AAA) or Judicial Arbitration and Mediation Services (JAMS). This decision allows those seeking expungement relief to avoid FINRA’s newly stringent filing requirements and special arbitrator panel mandates in favor of a less restrictive environment. Additionally, these alternatives allow the petitioner to bypass FINRA’s active encouragement of state regulators intervening in and opposing the expungement request. Unlike FINRA’s public forum, these alternatives keep the expungement filings and proceedings more private, which is an attractive incentive for many financial advisors who are concerned about their professional reputations in the wake of these sensitive matters.
Frequently Asked Questions (FAQs) About the FINRA Expungement Request Process
How much does the FINRA expungement request process cost?
From a financial perspective, FINRA’s new rules have made the expungement request process more expensive, as petitioners can find themselves facing considerable fees, costs, and other challenges.
How long do I have to file for expungement relief?
For straight-in requests, you have two years from the close of the customer arbitration or civil litigation. For written complaints, you have three years from the date that the customer complaint first appeared in the CRD system.
Can a single FINRA arbitrator decide a straight-in request?
No. Under FINRA’s revised rules, straight-in requests must be decided by three qualified public arbitrators who have been randomly selected from a list of authorized arbitrators.
How an Experienced FINRA Expungement Lawyer Can Help
The intricacies of FINRA’s arbitration codes and procedures can be confusing and daunting to navigate on your own. If you have been the target of an unfair customer complaint, it’s natural to worry about how this incident will affect your professional reputation and your career prospects. Before you give up hope, it’s important to discuss the specifics of your situation with a highly experienced and dedicated securities law attorney who can help you assess your options. Together, you can identify the most strategic course of action that allows you to protect your reputation and your professional future as much as possible. Whether you decide to file an expungement request through FINRA’s arbitration forum or you opt to take the matter directly to civil court or an alternative dispute resolution forum, you can trust that your knowledgeable and caring attorney will work hard to protect your interests at every turn.
Reach Out to a Trusted Securities Law Attorney Today
If you are struggling with unfair customer dispute information and you want to learn more about your options for filing a FINRA expungement request, Judex Law LLC is here to help. Founding attorney Tosh Grebenik has successfully defended professionals in the financial and securities industries from customer complaints and sought expungements of wrongful complaints. Please reach out to our Broomfield, Colorado office today by calling (303) 523-4022 to get started with a highly qualified and friendly securities law attorney.