FINRA maintains the Central Registration Depository (CRD) system. The CRD is an online registration and licensing system that contains disclosure information about registered securities firms and brokers. Numerous types of disclosure events can reported to the CRD system, such as civil and criminal matters and customer disputes (e.g., customer complaints and arbitrations). Most of this information is publicly available through FINRA’s BrokerCheck system. Securities brokers may seek to expunge (i.e., permanently delete or remove) one or more of these disclosure events (frequently, customer complaints) from their CRD records through the FINRA arbitration process.

Expungement is considered an extraordinary remedy. FINRA arbitrators should recommend expungement of customer dispute information only when it has no meaningful investor protection or regulatory value. Expungement of customer disputes is governed by conduct Rule 2080. The rule provides that expungement occurs only after FINRA arbitrators find and document one of the narrow grounds specified in Rule 2080: (1) the claim, allegation or information is factually impossible or clearly erroneous, (2) the registered person was not involved in the alleged investment-related sales practice, violation, forgery, theft, misappropriation or conversion of funds, or (3) the claim, allegation or information is false.

FINRA procedural rules require the broker seeking expungement to present his or her case (through documents and testimony) to the arbitrators at a recorded hearing, after which the arbitrators must make specific, written findings to justify the expungement. Then, if the arbitrators enter an appropriate award recommending expungement, the broker must file a court action to confirm the award.

Joel Ewusiak assists securities brokers seeking to expunge disclosure information from their publicly available BrokerCheck reports. Please contact Joel for legal assistance with your specific matter.