In recent months, the Financial Industry Regulatory Authority (FINRA) has made several announcements regarding sweeping changes to many areas of its rules and procedures. Despite vocal opposition from several members of the financial industry, the Securities and Exchange Commission (SEC) approved FINRA’s proposed amendments to the expungement request process. As of October 2023, individual brokers looking to have erroneous or unfair customer dispute information expunged from the Central Registration Depository (CRD) and the publicly available database BrokerCheck face significant hurdles to accomplishing this task. The amended rules aim to crack down on the number of expungement requests that FINRA honors, even though customer dispute information can be meritless and still appear on a broker’s profile—causing considerable damage to their professional reputation. This post will highlight some of the most significant rule changes to the FINRA expungement request process, with a particular focus on how the enhanced expungement training that FINRA requires of its arbitrators may affect your path toward obtaining a successful expungement request.
Adopted Amendments to the Expungement Request Process
On April 12, 2023, the SEC issued a press release highlighting its approval of FINRA’s proposed rule changes. Once these rules take effect, financial advisors seeking to have disclosures or customer dispute information expunged from the CRD and BrokerCheck will face additional hurdles as they pursue this request. FINRA’s recently approved rules boil down to seven core changes:
- FINRA requires that straight-in requests must be decided by a three-person panel made up of randomly selected public arbitrators who have received enhanced expungement training.
- The parties involved in the arbitration are not allowed to agree to fewer than three arbitrators to handle the expungement request matter, nor may they agree to strike any of the selected arbitrators. FINRA also prohibits the parties from stipulating to an arbitrator’s removal or to the use of pre-selected arbitrators.
- FINRA will notify state securities regulators in advance of all expungement requests and invite them to attend and participate in expungement hearings.
- The new rules place stricter time limits on how long a party has to file a straight-in expungement request.
- FINRA will move forward with updating materials that codify best practices for arbitrators, such as requiring the arbitrators to facilitate customer attendance and participation in upcoming expungement hearings.
- In order to issue an award containing expungement relief, the arbitrator panel must unanimously agree on this matter.
- In addition to the above rule changes, FINRA will also implement new procedural requirements for filing expungement requests.
Ultimately, FINRA intends to limit the number of successful expungement requests in an effort to protect the public from financial advisors or member firms acting in bad faith. However, these restrictions also jeopardize the reputations and careers of financial advisors who suffer from unfair, baseless, or downright false claims from customers.
What Does Enhanced Expungement Training Mean?
FINRA Dispute Resolution Services (DRS) requires its arbitrators to undergo “enhanced expungement training” before they can appear on the Special Arbitrator Roster. FINRA’s most recent newsletter included a link to the DRS learning system, enabling interested parties to attend this online training. Once a prospective arbitrator completes this training, they will be automatically added to the Special Arbitrator Roster. According to FINRA, all public chairs and interested parties are encouraged to participate in the enhanced expungement training session. This online training system consists of sixteen modules: Modules 1-15 cover Basic Arbitrator Training, while Module 16 addresses Expungement Training in particular. Essentially, the participants must go through each module in numerical order before moving along to the next module.
Potential Impacts of the Special Arbitrator Roster
As member firms and securities professionals face these new challenges and restrictions, it’s natural to wonder how the amendments and rules may impact a financial advisor’s ability to obtain expungement relief. Unfortunately, these new limitations will, in all likelihood, make it harder to successfully remove erroneous or false customer dispute information from your profile on BrokerCheck (and the CRD). In an effort to safeguard the public from predatory or bad-faith actors, FINRA has also made it easier for customers to make baseless claims against a financial advisor without requiring any evidence to support the validity of such allegations. The newly imposed time restrictions and the requirement that the three-person panel of arbitrators must unanimously agree to award expungement relief only make the expungement request process more daunting and challenging.
Identifying the Most Strategic Path Forward
If you are struggling with unfair or downright false customer dispute information that is damaging your professional reputation as a financial advisor, you are not alone. It’s natural to feel frustrated and concerned about how this disclosure will affect your career moving forward. No matter how intimidated you may feel, it’s essential to recognize that you have options. Now is not the time to go it alone—enlist the guidance of a trusted and experienced securities law attorney who can assess the details of your situation and develop the most appropriate course of action. Even with the new rules and amendments in place, your attorney understands how to advocate for your best interests. Your lawyer will work with you to answer your questions, address your concerns, and support you at every step of the expungement request process.
Get Started With an Experienced Securities Law Attorney Today
Experienced securities law attorney Tosh Grebenik has successfully defended professionals in the financial and securities industries from unfair consumer complaints. While his law firm is based in Colorado, he proudly represents clients throughout the country. You’ll receive a free initial consultation to discuss your situation, and you can trust that Tosh will develop a sound and effective legal strategy that’s customized to serve your needs and protect your best interests. As the new rules and regulations take effect, it’s comforting to know that you have a trusted securities industry professional in your corner to help you navigate potential obstacles with greater clarity and confidence.
If you need help seeking an expungement request through FINRA’s Dispute Resolution Services, contact Judex Law, LLC, today at (3030) 523-4022 to discuss your goals with a dedicated and experienced securities law attorney.