In August, we wrote about amendments to the FINRA Rules that made it more expensive for registered representatives to seek expungement of their Central Registration Depository (CRD) records. Last week, in an effort to reform the expungement process even further, FINRA submitted additional proposed rule changes to the U.S. Securities and Exchange Commission (SEC) for approval. If approval is granted, registered representatives will need to be even more vigilant about how and when they seek expungement of their CRD records.
For instance, under the current rules, a registered representative named as a party in a customer arbitration can wait until after the conclusion of the arbitration before making the related expungement request in a separate proceeding. The proposed rule changes prohibit such bifurcation and require that the expungement request be made during the underlying arbitration proceeding.
The proposed rule changes still permit a registered representative not named as a party in the underlying arbitration to make an expungement request in a separate proceeding, but such a request must be made within 2 years of the conclusion of the underlying arbitration. In addition, a registered representative named in a customer complaint that does not result in an arbitration must make his or her expungement request within 6 years of the complaint.
The proposed rule changes also reform the expungement arbitration process. For instance, expungement requests may currently be heard by one arbitrator or a panel of three. Under the proposed rule changes, expungement requests made after the conclusion of the underlying customer arbitration or complaint must be heard by three panel members, all of whom must be selected from a newly created special roster of arbitrators with enhanced training and experience to make decisions about expungements. According to FINRA, “having three arbitrators available to ask questions, request evidence and to serve generally as fact-finders in the absence of customer input would help ensure that a complete factual record is created to support the arbitrators’ decision in such expungement hearings.”
The attorneys at Chilivis Grubman represent broker-dealers and registered representatives in all types of FINRA disputes, including expungement proceedings. If you need assistance with such a matter, please contact us today.