FINRA approves revised proposal for roster of expungement arbitrators

On Behalf of | May 26, 2022 | FINRA Compliance

The Board of Governors for the Financial Industry Regulatory Authority has approved revisions to its plan to reform the process for brokers expungement requests, according to ThinkAdvisor.

The goal of FINRA’s plan is to create a special roster of arbitrators with enhanced training and experience to decide whether to expunge customer complaints from the public records of brokers.

The authority withdrew its initial proposal from the Securities and Exchange Commission a year ago to consider revisions. The measure approved by the board last week contains amendments to the original plan. Details of the amendments will become public once the new proposal is filed with the SEC, but FINRA has not yet set a timetable to submit it.

The previous plan was withdrawn after the Public Investors Bar Association (PIABA), a trade group for investor attorneys, issued a report saying it did not go far enough in curbing the problem of brokers trying to take advantage of the arbitration process to expunge their records.

PIABA found that attempts by brokers to use arbitration to expunge their records had risen over 1,000 percent over the past three years, and that these requests are approved 90 percent of the time by arbitration panels. FINRA said it is seeking to reform the expungement process “so that it operates as intended — as a remedy that is appropriate only in limited circumstances in accordance with the narrow standards in FINRA rules.”

FINRA released a discussion paper last month on its plans to revamp the expungement process, including its Special Roster Proposal that would create a panel randomly selected from a roster of experienced public arbitrators to hear requests by financial professionals to clear their records of complaints.

Lewitas Hyman has 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 Lewitas Hyman at (312) 291-4600 or through our online contact form for a free consultation.

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