New FINRA CRD BrokerCheck Expungement Rules
The New FINRA CRD BrokerCheck Expungement Rules for financial advisors or wealth managers with a disclosure on their FINRA BrokerCheck Report CRD record are going to make the right to request expungment of incorrect or false disclosures via the Financial Industry Regulatory Authority’s (FINRA) Dispute Resolution forum is about to become significantly more difficult–and impossible for most advisors. The SEC is scheduled to either approve or reject FINRA’s new rule proposal on April 12, 2023. The SEC is expected to greenlight FINRA’s latest rule proposal, which will introduce the stricter guideline.
What doe the New FINRA CRD BrokerCheck Expungement Rules proposed in SR-FINRA-2022-024 entail?
The proposal seeks to make the process for financial advisors seeking expungement of disclosures both significantly more difficult and in most cases, impossible, by adding several new stipulations. Here are five of the most concerning:
- TIME RESTRICTIONS: Time restrictions will be imposed on expungement requests. Financial advisors will only be allowed to request expungement within one year of the underlying event or within two years of filing the arbitration claim — whichever is earlier. This requirement aims to prevent advisors from waiting “too long” to seek expungement, potentially resulting in outdated or stale information remaining on their public records. It is also an unfair rule that will prevent financial advisors who wait too long to seek expungement from doing so. FINRA rules require that firms retain records for many more years than that, and at a minimum, the time limit should be that amount of time. Of course, I believe that placing any limit on how long one has to remove defamatory and damaging information that is available publicly is wrong and arguable violates constitutional due process rights.
- Three Arbirtator Pane: A three-arbitrator panel, instead of a single arbitrator, will be mandated for expungement requests. This will both increase the costs when seeking expungement and increase the level of scrutiny applied to expungement requests.
- Unanimous Panel Decision: A unanimous panel decision will be necessary for expungement approval, a significant shift from the current majority decision requirement.
- Eligibility Criteria More Stringent: More stringent eligibility criteria will be enforced. Specifically, financial advisors will only qualify for expungement if they have obtained a favorable arbitration award or settlement on the underlying claim, and if the panel deems the disclosure in question to be clearly erroneous or misleading. This requirement will significantly limit the circumstances under which a financial advisor can seek expungement.
- State Regulators Can Oppose: State regulators will be granted the right to oppose expungement requests. If a state regulator opposes expungement, then it is highly unlikely that a panel would grant the request.
If you have unfair disclosures on your FINRA BrokerCheck Report, then request a free consultation or call 1-800-405-5117 to speak with an Expungement Attorney now.
Pressure from Outside Investor Attorney Association PIABA on FINRA
Over the years, the Public Investors Advocate Bar Association (PIABA) and other investor groups have been pressuring FINRA and the SEC to limit the ability for financial advisors to expunge unfair disclosures from their public record. It now appears that their efforts have been successful, as these proposed changes to the expungement process seem to be a direct response to concerns raised by these groups. The groups argue that financial advisors have exploited the process for years to conceal various instances of misconduct. They believe that allowing financial advisors to request expungement of disclosures from their public records jeopardizes the regulatory system’s integrity and puts investors at risk. However, there is no data to support such claims, and we think it is unjust to deny financial advisors the right to a fair hearing about unsubstantiated allegations that are publicly available.
It is crucial to balance investor protection with ensuring that financial advisors are not unfairly prejudiced. By making it unfairly difficult for financial advisors to request expungement of false or inaccurate disclosures from their public FINRA CRD BrokerCheck Report records, PIABA and other groups are essentially denying advisors their due process, and reasonable, rights–jeopardizing their livelihoods. While protecting investors is important, safeguarding financial advisors from being treated unfairly and potentially ruining their careers is equally vital.
Financial Advisors Oppose the New Rule
FINRA’s recent proposal has received criticism from both financial advisors and broker-dealers. Many financial advisors and wealth managers contend that the proposed changes will unfairly punish those falsely accused of misconduct by making it more difficult and expensive to remove unfounded or unjust complaints from their public records. They argue that the current system already offers adequate safeguards to prevent expungement process abuse and that the proposed changes are unnecessary and overly burdensome and unfair.
Once this proposal is approved, financial advisors who have been victims of false or inaccurate disclosures will face a more complicated, costly, and time-consuming process to seek expungement–if they aren’t barred from seeking expungement altogether. Additionally, they may encounter increased scrutiny from state regulators, who will now have the right to oppose expungement requests.
Financial advisors emphasize that there is little evidence to suggest that the expungement process is being abused or misused. In fact, a recent study by FINRA indicates that only a small percentage of expungement requests are granted, implying that the current system is functioning as intended.
Do you have disclosures on your record?
The impending approval of FINRA’s expungement rules proposal and the implementation of Rule 4111 this year places significant pressure on financial advisors to maintain clean regulatory records. Fortunately, you can take measures to safeguard your record. Galvin Legal specializes in successfully removing disclosures from FINRA’s CRD and BrokerCheck systems. James P. Galvin, Esq. has a 92.7% success rate expunging customer dispute disclosures, and a 100% success rate when the underlying customer and/or attorney participates.
Request a Free Consultation with a FINRA CRD Expungement Attorney
If you are a registered representative with unfair disclosure items on your FINRA BrokerCheck Report that are hindering your ability to grow your practice or find another job in the financial services industry, and would like to find out about having the unfair disclosure removed through a FINRA CRD BrokerCheck Expungement proceeding, then request a free consultation or call 1-800-405-5117 to speak with a FINRA CRD BrokerCheck Expungement Attorney now. Galvin Legal, PLLC is a national securities arbitration, securities mediation, securities litigation, securities regulation and compliance law practice. For more information on Galvin Legal, PLLC, please visit www.galvinlegal.com or call 1-800-405-5117.
