WASHINGTON — The Financial Industry Regulatory Authority (FINRA) today issued a Regulatory Notice requesting comment on changes to the expungement process.
FINRA proposes to establish a roster of arbitrators with additional training and specific backgrounds or experience from which a panel would be selected to decide requests for expungement of customer dispute information in settled cases and in cases brought for the sole purpose of seeking expungement. The Dispute Resolution Task Force in its Final Report and Recommendations recommended that FINRA create such a roster.
Regulatory Notice 17-42 also proposes changes to the timeframe in which an associated person can seek expungement of the customer dispute information, as well as the unanimous consent of a three-person panel of arbitrators to grant expungement.
In addition to these proposed changes, FINRA is discussing with the North American Securities Administrators Association (NASAA) more extensive changes to the process.
“The proposals help address concerns related to arbitration panels granting expungement requests without hearing the full merits of the underlying case,” said Richard Berry, Executive Vice President and Director of FINRA Office of Dispute Resolution. “The proposed changes also would make it easier for customers to participate in expungement hearings and make information about the underlying case more readily available to arbitrators.”
Comments on the Notice are requested by February 5, 2018.
Through the expungement process, associated persons may seek to remove allegations made by customers from the Central Registration Depository (CRD®), the central licensing and registration system for the U.S. securities industry. Registered securities firms and regulatory authorities submit information in CRD in response to questions on the uniform registration forms. These forms collect administrative, disciplinary and other information about registered personnel, including customer complaints, arbitration claims and court filings made by customers, and the arbitration awards or court judgments that may result from those claims or filings. The SEC, FINRA, state and other regulators use this information in connection with their licensing and regulatory activities.
Most of the CRD information is made publicly available through BrokerCheck®—FINRA’s free tool to research the background and experience of financial brokers, advisers and firms.
FINRA is dedicated to investor protection and market integrity. It regulates one critical part of the securities industry – brokerage firms doing business with the public in the United States. FINRA, overseen by the SEC, writes rules, examines for and enforces compliance with FINRA rules and federal securities laws, registers broker-dealer personnel and offers them education and training, and informs the investing public. In addition, FINRA provides surveillance and other regulatory services for equities and options markets, as well as trade reporting and other industry utilities. FINRA also administers a dispute resolution forum for investors and brokerage firms and their registered employees. For more information, visit www.finra.org.