By Jonah A. Toleno, Partner of Shustak Reynolds & Partners, P.C. posted on Tuesday, August 24, 2021.

Jonah A. Toleno

Of Counsel

Location: San Diego, California
Phone: (619) 696-9500 (Ext. 104)
Direct: (619) 501-6483
Email: [email protected]

FINRA proposed a change to its expungement rules in the Fall of 2020, seeking to alter certain aspects of the expungement process, including substantially shortening the time limit for a registered representative to seek expungement of customer-related disclosures and allowing expungement to be granted only by a three-person panel (previously a single arbitrator could order expungement).

FINRA states on its website:

Expungement, as an extraordinary remedy, should be recommended only in circumstances in accordance with FINRA rules to remove clearly inaccurate customer dispute information from the record of an individual broker that is associated with a broker-dealer firm. These records are part of the Central Registration Depository (CRD®) system, which is the source of the information provided to the public through BrokerCheck®—a free tool to provide investors with information regarding a broker’s employment history, regulatory actions, investment-related licensing information, arbitrations and complaints.

Earlier this year in May 2021, FINRA temporarily withdrew its proposed changes. This is a significant development, particularly affecting FINRA-registered advisors who may not have the means or ability to seek expungement within the proposed, shortened time frame. The current expungement rules continue to apply until further notice from FINRA, and/or the SEC, which approves all FINRA-proposed rule changes.

Even without the more restrictive proposed changes to the rules, obtaining expungement from FINRA generally is quite challenging. FINRA notes on its website that from 2015 to 2020, it entered approximately 35,000 customer disputes into its CRD (Central Registration Depository) system, and only about 1,500, or 4%, of these disputes were expunged.

Our firm is highly experienced in FINRA arbitration matters, including broker expungement and customer dispute issues. If you are a FINRA-registered representative interested in learning more about the expungement process, feel free to contact us for a consultation to discuss your options.

Shustak Reynolds & Partners, P.C. focuses its practice on securities and financial services law and complex business disputes.
We represent many broker-dealers, registered representatives, investment advisors, investors and businesses.
Attorney Jonah A. Toleno can be reached in the firm’s San Diego office at (619) 696-9500.

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