What Findings Are Required for FINRA Expungement?

Under FINRA Rule 2080, broker-dealer firms, offices, and professionals in the securities industry can request customer disputes be expunged from FINRA’s public records. When reputation is so important to client trust and retention, expungement is a no-brainer. But FINRA has high standards of review and a limited appeals process to challenge decisions – you must make sure to take the right steps when approaching this process. This is especially true if you’re currently in the middle of an unresolved arbitration. Otherwise, your request for expungement could be denied, leaving the dispute on your firm’s record. So, what findings are required for FINRA expungement?

FINRA Expungement stamp

The SEC recently proposed new rule changes to the expungement process. An experienced securities lawyer can help you navigate this ever-changing arena of regulations.

FINRA Expungement Requirements

FINRA’s expungement process is meant to balance three separate industry interests:

  • Regulators who need relevant and correct information to fulfill their duties,
  • Brokerages who need a fair process to defend their professional reputations, and
  • Investors who need substantive and accurate information to make decisions.

As a result, the agency considers expungement an extraordinary remedy to be allowed only if the expunged records hold no significant value for regulators or investors.

FINRA Rule 12805 details the process for filing a successful request for expungement of customer dispute information. This includes a recorded hearing session, a review of relevant settlement documents, and regulatory grounds for why expungement should be granted.

There are four reasons expungement may be granted under FINRA Rule 2080:

  • The information in the claim is factually impossible or clearly erroneous,
  • You weren’t actually involved in the alleged misconduct or violation,
  • The allegation, claim, or information in the dispute is false, or
  • You were awarded expungement in another judicial or arbitration proceeding and the expungement would not have an adverse effect on industry interests.

FINRA sets out different procedures for handling expungement based on whether the expungement orders are granted through an arbitration panel, an outside court, or a settlement reached either in or outside the arbitration process. For example:

  • Outside-court expungement directives must be issued in compliance with Rule 12805, which requires an affirmative finding for expungement under Rule 2080.
  • FINRA may expunge records based on defamation even without a court order.
  • If you settle in arbitration, you can jointly request an affirmative finding for expungement from the arbitration panel.
  • If you settle outside the arbitration process, you will likely have to obtain a court order confirming any settlement award for expungement.
  • If you reach a settlement after arbiters have issued a decision on the merits, both parties may jointly request that arbiters reopen the case to make substantive changes to the arbitration award. However, this comes with a short time limit.

An experienced FINRA litigation attorney will know how to properly handle these matters and set you up for the best possible chance at a successful resolution.

How to Present the Best Case for FINRA Expungement

When filing an expungement request, you must keep FINRA’s industry interests in mind. Regulators are concerned with having accurate and relevant information on record. A good securities lawyer should be able to anticipate, address, and disarm any concerns that regulators may have about the possibility of your expungement threatening any of these interests.

What findings are required for FINRA expungement? FINRA expungement rules are strict and the process is thorough. Between 2015 and 2020, the agency only expunged 4% of all customer disputes entered into the Central Registration Depository (CRD). You want to do everything you can to fall into that 4%. Because expungement is granted in only a narrow band of cases, you must be able to present convincing evidence that shows you qualify for this type of relief. At Warren Law, we can help. Click here to contact us now and discuss your options for FINRA expungement.

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Christopher D. Warren

Christopher D. Warren, Managing Partner