Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Friday, December 14, 2007

FINRA Proposes New Rule on Expungement Procedures

FINRA announced today that its Board of Governors approved a rule proposal that would impose expungement procedures requiring arbitrators to take specific steps, including issuing a written explanation, before recommending expungement of information related to arbitration cases from a registered person's Central Registration Depository (CRD) record. This proposal is designed to assure that expungement occurs only when one of the narrow grounds specified in the FINRA rules—factual impossibility, no involvement by the registered person or falsity—is determined and documented by the arbitrators.

The proposed rule would require arbitrators considering an expungement request to hold a recorded hearing session by telephone or in person and provide a brief written explanation of the reasons for ordering expungement. In cases involving a settlement, arbitrators would be required to review the settlement documents to evaluate culpability by examining the amounts paid to any party and any other terms and conditions of the settlement before awarding expungement.

Expungement has been an ongoing controversy.  Investors' advocates say it rewrites history and that customers are entitled to know if their brokers have been in disputes with their customers, while industry representatives say that brokers need protection against frivolous complaints or simple misunderstandings.  The Nw York Times had an article today, reviewing the respective positions.  NYTimes, Site That Tracks Brokers Questioned on Erased Cases.

Other Regulatory Action | Permalink

TrackBack URL for this entry:

Listed below are links to weblogs that reference FINRA Proposes New Rule on Expungement Procedures:


Post a comment