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FINRA Expungement Attorneys

FINRA (Financial Industry Regulatory Authority) expungement is a legal process to remove certain information from a financial professional’s record on the CRD (Central Registration Depository) system. The CRD system is a comprehensive database that holds records of individuals and firms working in the securities industry.

Expungement becomes relevant when a financial professional seeks to erase specific customer dispute information, arbitration claims, or disciplinary actions from their record. This procedure aims to accurately represent a professional’s history by removing potentially damaging or misleading information.

The process typically involves filing a formal request with FINRA, which reviews the case to determine if expungement is warranted. Given the intricate nature of this process, individuals often seek legal representation to navigate the complexities and improve their chances of a successful expungement.

Our FINRA expungement lawyer understands the regulatory framework, procedures, and best strategies for presenting a compelling case. This experience helps individuals effectively present their arguments and evidence to FINRA, increasing the likelihood of a favorable outcome.

Grounds for FINRA Expungement Requests

FINRA Rule 2080 outlines the requirements for FINRA expungement. The arbitration panel can grant expungement if you meet one of the following guidelines.

The information, allegation, or claim must be:

  • Erroneous or factually impossible: You can file for an expungement if the information, allegation, or claim is clearly erroneous or factually impossible. For instance, if you were not employed by the firm when the alleged activity occurred, you can file for expungement.
  • Filed against someone not involved in the violation, misappropriation, forgery, theft, or conversion of funds: You can file for expungement if you weren’t involved in the activity covered in the customer complaint. The arbitration panel must determine that you didn’t participate in the investment-related sales practice violation and, thus shouldn’t be held accountable.
  • False: You can file for an expungement if the information, allegation, or claim is false. The arbitration panel can grant the expungement after reviewing the evidence. The expungement will be granted if the evidence doesn’t point to a violation.

While these are the basic guidelines, filing for and receiving a FINRA expungement is complicated. Consult with an expungement lawyer to see if you qualify. Information that can usually be expunged arises from disputes between member firms and customers or their associated persons that the brokerage firm has reported on Forms U-4 and U-5 in response to those claims.

It is also possible to have complaints about defective structured products expunged. Occasionally, brokerage firms engage in Form U-5 Abuse and publish defamatory material that can be expunged.

What to Expect During the FINRA Expungement Process

My RIA Lawyer begins by filing a Statement of Claim to FINRA. Then, the FINRA expungement lawyers communicate with the investor who filed the original claim.

We select an arbitration panel for the hearing. Then, after requesting all necessary paperwork, the attorney conducts pre-hearing conferences and attends the hearing. After receiving approval from the arbitration panel, our FINRA expungement lawyers file a motion in the state court. Once the court grants the motion of expungement, My RIA Lawyer sends the paperwork to FINRA, and the records are expunged.

If the party seeking expungement is involved in an arbitration proceeding, they are required to request expungement in their answer, statement of claim, or counterclaim. The arbitrators will then decide whether to grant the expungement request based on one or more of the three standards specified in Rule 2080 of the FINRA Code of Arbitration Procedure.

The rule outlines special procedural requirements that relate to requests for expunging disputed customer information, which include that arbitrators are required to hold recorded telephonic or in-personal hearings, review settlement documents, and consider the number of payments made to any party in any other terms and conditions of the settlement.

If the arbitrators grant expungement relief, they must also provide a brief explanation and factual basis for finding that it is appropriate under one or more of the Rule 2080 standards.

Statute of Limitations for Expungement Requests

Starting October 16, 2023, new FINRA rules have changed the time limit for filing expungement requests. Associated Persons (APs) must now file their requests within one of two deadlines:

  • Within Two Years After Customer Litigation or Arbitration Conclusion: APs have a strict two-year window after the conclusion of customer litigation or arbitration related to the dispute to request expungement.
  • Within Three Years After Initial Customer Complaint Reporting: Alternatively, APs can file an expungement request within three years from the date the customer complaint was first reported in the CRD system.

These new statutory limitations underscore the importance of timely action for APs considering expungement. Failure to adhere to these strict deadlines may result in the forfeiture of the opportunity to have certain information expunged from their record.

Additional Rules Regarding Expungement Requests

Settlement of customer claims can’t be conditioned on the customer either supporting or refraining from opposing expungement requests.

If the court previously rejected an expungement request, e.g., if it was part of a lawsuit, then it will be automatically dismissed by FINRA.

Commenting On Claims Isn’t Enough

You can leave explanatory comments on claims made against you. However, investors will likely ignore the comments, especially if you have numerous claims. Also, they aren’t likely to investigate the claims to determine their merit. Instead, they will move on to another registered investment adviser.

Expungement is the only way to protect your interests. Without it, investors might view you as a problematic or unethical adviser, even if the claims aren’t based on fact. Contact an Expungement lawyer to begin the process.

Expungement Rule Changes

FINRA has made sweeping rule changes that now complicate the expungement process.

These amendments to the Codes make many important changes to the current framework related to the expungement of customer dispute information.

Some of the more notable new expungement rules include:

  • Strict Time Limits: Under the new rules, there are stricter time limits on requesting expungement.
  • Expungement During Customer Arbitration: APs mentioned in customer arbitrations must now request expungement during that arbitration. Failing to do so means forfeiting the opportunity.
  • Three-Person Panel: Straight-in requests will be decided by a randomly selected three-person panel from a special roster of arbitrators. Rankings, strikes, or stipulations are no longer allowed in these cases.
  • Updated Expungement Guidance: FINRA has codified and updated its Notice to Arbitrators and Parties on Expanded Expungement Guidance, focusing on customer notice and participation in hearings.
  • Notification Requirements: The new rules establish requirements for notifying state securities regulators and customers about expungement requests.

We understand that these recent rule changes can be complex and daunting for individuals seeking to clear their records. Our team is here to guide you through these changes and provide strategic legal counsel. We are well-versed in the new expungement rules, ensuring that your case is handled with precision and care.

Contact Our FINRA Lawyers Today

Are you a financial professional seeking expungement? Do you want to safeguard your reputation and ensure accurate representation of your record?

My RIA Lawyer is here to guide you through the process of FINRA expungement. With a deep understanding of the financial world and a proven track record of success, we’re committed to crafting tailored strategies that address your unique situation.

Don’t let past disputes or actions define your professional trajectory. Take the first step towards a cleaner record, and contact us today.

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What findings must arbitrators make to grant expungement?

Arbitrators can order expungement for various reasons. If a party doesn’t want the expungement order to be challenged by FINRA and waive participation in any subsequent court confirmation proceeding, however, the arbitrators are required to affirmatively find that the claim’s subject matter or information in the CRD system meets one of more of 3 standards:

  • The allegation, claim, or information is either clearly erroneous or factually impossible.
  • The registered person wasn’t involved in the alleged investment-related sales practice violations, theft, forgery, conversion, or misappropriation of funds.
  • The allegation, claim, or information is false.
What's the next step to clear the record if expungement is awarded?

To request expungement, send FINRA a letter asking to skip court confirmation proceedings and include important documents like the statement of claim, answer, arbitration award, settlement agreement, and other relevant papers. FINRA will review the request and either allow or deny it. If denied, you can still proceed but must include FINRA as a party in court. Both state authorities and FINRA can challenge the expungement, and a judge decides whether it’s in the public interest to remove it from your record.

Is it possible to expunge a record without a court proceeding?

Yes. FINRA can remove expungement directives from arbitration awards between registered representatives and firms, even if there is no court order. This can happen if the arbitration panel decides the information is defamatory and the relief was granted due to Form U-5 Abuse cases.

Jurisdiction for disputes can be secured in two ways:

  • Voluntary consent of both parties to the dispute
  • Mandatory arbitration provision in the contractual agreement – e.g., employment or customer agreement.

Arbitration cases are of two general categories:

  1. Customer Disputes: A customer files a claim or complaint against a FINRA member arising from a transaction. Examples: breach of fiduciary duty, misleading advertising, theft, fraud, violation of permitted sales practices, etc. The remedies available are the compensatory damages for harm to the customer.
  2. Employment Disputes: The disputes between former or current employers and employees. Claims can be made by Employees (harassment, discrimination, wrongful termination, etc.) or Employers (conversion, fraud, breach of contract – most significantly, breach of non-compete, non-solicitation, or non-disclosure in employment agreement).

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