What does the expungement process look like for brokers?

| Jun 4, 2020 | Expungement

As a broker, if a customer files an official complaint with FINRA against you, it can feel comparable to a black mark on your career record or the equivalent of a scarlet letter in the finance field. The FINRA database system automatically adds the complaint information to your credentials on the Central Registration Depository, which is visible to the public—and potential future clients.

What is expungement?

Expungement is the process by which you can have the record of the customer dispute deleted from your public record. While this a highly desirable outcome, not everyone qualifies for expungement. If you committed the act cited in the customer dispute, you cannot have the claim expunged. However, in some circumstances, you can rectify your record by pursuing expungement through securities arbitration.

In what circumstances is expungement possible?

  • The customer claim, allegation or information is factually impossible
  • The customer claim, allegation or information is false
  • You were not involved in the alleged in the act in question, meaning it another financial professional perpetrated the act

If any of these scenarios applies, you may qualify for expungement. However, the burden of proof is on you during expungement proceedings.

What does the process entail?

Preparation is key to the expungement process. As stated above, the burden of proof will be on you. You will need evidence to support your claim that your case falls into one of the qualifying scenarios. You will also need to notify the customer, so that they can defend their claim, if they choose. The FINRA arbitrator will make the final determination on whether to grant the expungement.

Why is expungement a good business move?

It is a good way to protect or reclaim your reputation. Prospective clients—especially if they are particularly prosperous—may check the FINRA database before hiring a financial professional. Having a complaint on your record could harm your chances of getting that account. However, an expungement takes the complaint out of the equation. It literally gives you a clean slate.