Securities Law Prof Blog

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

Friday, August 31, 2012

California Court Says Brokers Can Invoke Equitable Powers to Expunge CRD Records

A California appellate court recently held that a registered representative could invoke the court's equitable and inherent powers to do justice and pursue an action to expunge his public securities brokerage records from FINRA's central registration depository database (CRD).  FINRA had maintained that there were no grounds for expungement apart from the very narrow criteria set forth in FINRA Rule 2080(b), which were not applicable here.  Lickiss v. FINRA (Cal. 1st Appel. Dist. Aug. 23, 2012) (Download Lickiss.082312[1])

The broker, Edwin Lickiss, sought expungement of 17 customer complaints and a regulatory action filed between 1991-1996 because those records were old and because 13 of the 17 customer complaints related to sales of one specific stock, whose failure was outside his control.  Asserting that he had a clean record since then, he sought expungement because he suffers professional and financial hardship because current and potential clients use the internet to obtain his BrokerCheck history.

The appellate court found that the trial court erred by relying exclusively on FINRA Rule 2080 as the grounds for expungment, since the broker had invoked the equitable powers of the court.  "The choice of a very narrow, rigid legal rule to assess the legal sufficiency of Lickiss's petition -- a choice that closed off all avenues to the court's conscience in formulating a decree and disregarded basic principles of equity -- was nothing short of an end run around equity."

As a result of this decision, commentators predict that more brokers will seek expungement of CRD records, in an effort to rewrite history and clean up their records.

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