The Financial Industry Regulatory Authority has submitted a revised version of its proposal to reform the process for brokers expungement requests, according to a report by Investment News.
As we reported in May, the revisions were first approved by FINRA’s Board of Governors, and were filed recently with the Securities and Exchange Commission for approval.
The plan would create a special roster of arbitrators with enhanced training and experience to decide whether to expunge customer complaints from the public records of brokers, and would require the unanimous agreement of an arbitration panel in order to grant expungement.
FINRA’s original plan was withdrawn in May 2021 after concerns were expressed by SEC staff members. The revised proposal would provide notification to state securities regulators of expungement requests and a mechanism for the state regulators to attend and participate in expungement hearings that involve ‘straight-in’ expungement requests, those that are filed by a registered representative separately from a customer arbitration.
The report noted that the new proposal has drawn support from those who criticized the original FINRA proposal for not going far enough in curbing brokers’ ability to expunge customer complaints. Those critics pointed out a need for state regulators to be involved in expungement hearings, which have often been limited to financial firms and brokers attempting to clear their records.
The North American Securities Administrators Association, which represents state regulators, has previously expressed concern that opposition is not always present in expungement request hearings, and said it would evaluate the latest proposal by FINRA. NASAA President Melanie Senter Lubin was quoted as saying, “NASAA’s view is, and has been, that expungement of customer complaint information is an extraordinary remedy and that, for too long, the process has allowed expungement to happen on a routine, not extraordinary, basis.”
In submitting its revised proposal, FINRA expressed its concern that the current expungement process was not working as intended, as “a remedy that is appropriate only in limited circumstances in accordance with the narrow standards in FINRA rules.”
The attorneys at Hyman Cotter PC have considerable experience with FINRA’s procedures for expunging false, defamatory and erroneous disclosures from a registered representative’s record. If you have any concerns about problematic disclosures on your CRD record or those that are viewable on FINRA’s BrokerCheck portal, contact Hyman Cotter PC at 312-291-4600 or through our online contact form for a free consultation.
