Securities Law Prof Blog

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

Monday, November 3, 2008

SEC Approves FINRA Rule Change on Expungement Procedures

The SEC approved FINRA's Proposed Rule Change Amending the Codes of Arbitration Procedure to Establish Procedures for Arbitrators to Follow When Considering Requests for Expungement Relief. Rules 12805 and 13805 set forth procedures that arbitrators must follow before granting expungement of information from an associated person's CRD record. Specifically, in order to grant expungement of customer dispute information under Rule 2130, the panel must: (i) hold a recorded hearing session by telephone or in person regarding the appropriateness of expungement, even if a claimant did not request a hearing on the merits; (ii) for cases involving settlements, review the settlement documents to examine the amount paid to any party and any other terms and conditions of the settlement that might raise concerns about the associated person's involvement in the alleged misconduct before awarding expungement; (iii) indicate in the arbitration award which of the grounds for expungement in Rule 2130(b)(1)(A)-(C) serves as the basis for the expungement order and provide a brief written explanation of the reason(s) for its finding that one or more grounds for expungement exists; and (iv) assess forum fees for hearing sessions in which the sole topic is the determination of the appropriateness of expungement against the parties requesting expungement.

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