As a financial advisor, your reputation matters. You want to make sure that your track record remains as sterling as possible. Unfortunately, customers can lodge complaints against you—even ones that are exaggerated, baseless, or downright false. These complaints become part of the Central Registration Depository (CRD) system and BrokerCheck, which the public can search and find information about your employment history, licensing information, and customer complaints. So, what can you do if a customer has lodged a complaint against you? The Financial Industry Regulatory Authority (FINRA) allows brokers to seek an expungement of customer dispute information, but the process can be lengthy and stressful. It’s a good idea to enlist the support of a trusted securities law attorney to help you navigate the expungement process. Below is a brief overview of FINRA’s expungement process and the steps you can take to initiate this process.
How Customer Dispute Information is Reported
FINRA’s aim is to protect the public from brokers with a history of misconduct or other unfair practices. As such, they allow broker-customer disputes to appear in the CRD system, even if the information is irrelevant or false. Customers do not need to provide proof to support their complaints, making brokers vulnerable to publicly available inaccurate information through the CRD and BrokerCheck. It can be alarming to learn that a customer has lodged a complaint with the CRD, especially if it is false, misleading, or even malicious. If this happens, you can initiate an expungement request with FINRA to have this information removed from your record.
What the FINRA Expungement Process Entails
As soon as you learn that customer dispute information has been entered into the CRD and BrokerCheck, you can initiate an expungement request through FINRA’s arbitration forum. You will appear before a panel of independent arbitrators who will determine whether to recommend expungement. If the panel makes this recommendation, you need to obtain an order from a court of competent jurisdiction confirming this arbitration award and then present this order to FINRA. Alternatively, you can bypass the FINRA arbitration process and pursue an expungement request directly from a county of competent jurisdiction. Once FINRA receives the court order, FINRA must comply with the expungement recommendation. Historically, FINRA granted expungement requests with regularity, but recent proposals to amend current rules may make the expungement process more cumbersome for those pursuing such requests.
Potential Changes to FINRA’s Expungement Request Rules
Recently, FINRA recommended that a separate and specialized roster of specially-trained arbitrators be created to oversee proceedings in which brokers wish to expunge customer dispute information. This panel of arbitrators would be different from the panel overseeing the arbitration of the underlying dispute. FINRA believes that this shift would provide arbitrators with a clearer picture of the situation, as customers would be more likely to participate in the process. Unfortunately for financial advisors, this proposed rule change would impose strict time limits within which they may request expungement and potentially make it more challenging to obtain an expungement.
Other Limitations to the FINRA Expungement Process
In recent months, FINRA has filed additional proposed rule changes with the Securities and Exchange Commission (SEC) that could reshape the expungement request process. For instance, FINRA proposed a rule preventing a broker who withdraws an expungement request to re-file the same request at a later date and requiring that the broker pursuing expungement appear personally at the expungement hearing. Additionally, these rule changes seek to broaden the scope of any documentary, testimonial, or other evidence that member firms and brokers must provide to the arbitrators. As FINRA moves forward with these proposed changes, it’s essential that brokers and financial advisors keep a close eye on how these rules could impact their reputation and professional future.
Steps to Take to Initiate a FINRA Expungement Request
If customer dispute information has appeared on your BrokerCheck profile, you should contact an experienced securities law attorney right away to discuss your options. It’s natural to feel overwhelmed and even intimidated by the FINRA expungement request process, especially if this is your first experience moving through it. While you can complete the expungement request process without outside counsel, working with a legal professional who understands the ins and outs of the process is highly recommended. Your attorney can answer your questions, address your concerns, and give you the clarity and confidence you need to move forward. Additionally, your lawyer can keep you informed of any new modifications to FINRA rules, ensuring that your expungement request proceeds as smoothly and successfully as possible.
If you want to learn more about how to pursue a FINRA expungement request, call Judex Law, LLC, today at (303) 523-4022 to speak with a trusted and friendly securities law attorney.