A single negative mark on your Central Registration Depository or BrokerCheck report can be a nightmare for a registered representative. Unfortunately, such marks are often the result of customer complaints, which are reported to FINRA.
In this article, we will explore the process of FINRA expungement and provide guidance on how to navigate this complex and often confusing process.
What is expungement in FINRA?
Expungement in FINRA refers to the process of removing certain information from a broker’s record. This information may include disciplinary actions or other negative events that could reflect poorly on the broker. Expungement is typically sought by brokers who believe that the information on their record is inaccurate, false, or unfairly damaging to their reputation. It is important to note that expungement is not always granted, and the process can be difficult and time-consuming. Additionally, even if expungement is granted, the information may still be available to certain parties, such as potential employers.
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To request expungement, a broker must file a request with FINRA and provide evidence supporting their claim that the information is incorrect or false. FINRA believes investors have a right to access accurate and complete information about brokers and the firms they work for.
How much does FINRA charge for expungement?
Requests for expungement are free of charge with FINRA. But there might be expenses involved with the expungement procedure, such as legal or arbitration fees, as well as other outlays for organizing and presenting your case.
Depending on the difficulty of your case and the lawyer’s experience, the price of legal fees might vary greatly. While some lawyers may bill a flat fee for their services, others might bill by the hour. Negotiating fees and costs upfront with your lawyer so you are fully aware of the expenditures entailed is crucial.
Another factor is the cost of the arbitration. For the use of its arbitration services, FINRA charges fees, which include filing and hearing session fees. These costs are dependent on the size of the claim and the number of arbitrators required to resolve the dispute.
Does FINRA see expunged records?
FINRA does have access to expunged records, but only under certain circumstances. For instance, if a broker is the subject of an investigation for misconduct, FINRA may ask to see the broker’s sealed documents as part of the inquiry. When a broker seeks expungement of information from their record, the request is reviewed by a FINRA arbitration panel. If the panel decides that the data should be erased, it is done from the broker’s Central Registration Depository (CRD) record.
*The CRD is a FINRA-maintained electronic database that contains data about brokers and their registration status.
However, FINRA retains a copy of the deleted information in a separate database called the Broker Check Public Disclosure Program. This database is available to the public and contains information about brokers and their backgrounds, including any customer disputes that were erased from their CRD records. Expungement can remove certain information from a broker’s CRD record; it does not guarantee the complete erasure of the information.
The most common complaint filed with CRD involves.
- Complaints related to the handling of customer accounts or funds.
- Allegations of unauthorized trading or churning.
- Failure to disclose material information or conflicts of interest.
- Complaints related to the sale or marketing of securities products.
- Failure to comply with FINRA or SEC rules and regulations.
- Employment-related complaints, such as wrongful termination or discrimination.
- Criminal or civil actions filed against a registered representative or firm.
How do I get my record expunged from FINRA?
Here are the general steps to follow:
Hire an attorney:
You are strongly encouraged to engage with a skilled attorney with experience in securities law since expungement is a legal procedure. Your attorney will provide direction throughout the procedure and help you determine whether or not expungement is the appropriate course of action, given your unique set of circumstances.
Expungement request submission:
Your attorney will assist you in submitting an expungement request to FINRA. Your request should contain a thorough justification for why you think the data in your file is inaccurate.
A FINRA arbitration panel will examine the filed application. You must take part in the arbitration process, which can entail offering testimony or supporting your demand with evidence.
Inform other parties:
If your request for expungement is approved, you must inform other people that the data has been erased. This can include reporting any parties who might have been impacted by the material on your record, such as your prior clients, employers, or employers.
What cannot be expungent?
Certain disclosure events cannot be removed from a broker’s record, including:
- Civil judicial actions
- Criminal matters (such as convictions for felonies or specific misdemeanors related to fraud, bribery, or property theft)
- Financial matters
- Official investigations
- Regulatory actions
However, if a broker fulfills a judgment or lien, it can be eliminated from BrokerCheck, although it cannot be erased from CRD. It means that brokers must be diligent in their actions and ensure that they comply with the law to avoid any permanent negative marks on their records.
What is FINRA expungement rule 13805?
FINRA Expungement Rule 13805 is designed to protect investors’ rights to access accurate and complete information about brokers and their backgrounds while also providing a mechanism for brokers to seek relief from unfair information on their documents.
A FINRA arbitration panel is required by the rule to consider expungement requests and must reach specific conclusions before granting an expungement request. The panel must specifically extrapolate that the claim, accusation, or information is factually impossible, plainly untrue, or erroneous or that it has any factual or legal basis. The panel must also determine that the assertion, accusation, or piece of information is inherently defamatory or has the potential to damage the broker’s reputation and that the expungement would not prohibit investors from learning the truth about the broker or the company they represent.
It is essential to seek advice from a legal expert before beginning the expungement procedure in order to determine the viability and potential costs associated with pursuing this option.
At MAH, we understand that legal issues can be stressful and overwhelming. That is why we are here to help. Our firm specializes in providing comprehensive guidance and support for individuals who are dealing with U5 filings, expungement, and other legal matters.