FINRA’s Expungement Procedure – Setting the Record Straight

A broker’s record is open for the world to see by just going to the BrokerCheck Web site of in keeping with the full disclosure centerpiece of the securities industry. Sometimes, however, entries appear on a broker’s record that are false.  Brokerage firms are required to report all customer complaints and customer arbitrations, even if the complaints have no merit and are rejected by the firm and even if an arbitration panel dismisses the customer’s allegations of wrongdoing.  Removing the existence of a customer matter from a broker’s record has become harder but is possible if the broker retains an attorney experienced in this unique process – an attorney who is creative in the presentation of the broker’s case before an arbitration expungement panel.
In a customer arbitration, it is the customer who has the burden of proof that the broker’s conduct caused the losses suffered. In an expungement arbitration, the tables are turned: it is the broker who must prove, by a preponderance of the evidence, that either:

  • The claim, allegation or information is factually impossible or clearly erroneous;
  • The registered person was not involved in the alleged investment-related sales practice violation, forgery, theft, misappropriation or conversion of funds; or,
  • The claim, allegation or information is false.

It has been my experience that expungement hearings – which can be conducted by teleconference or in person – are no “walk in the park.”  Each arbitrator asks tough questions of the broker before deciding whether to grant this request for a permanent deletion of the Reportable Event on the broker’s official public record.

Once an expungement Award has been granted by the arbitrators, the broker must have the Award confirmed in court as a judgment, giving FINRA an opportunity to intervene. And once the Award has been confirmed as a court judgment, the broker must transmit a copy of the judgment to FINRA so that the existence of the arbitration can be expunged from the broker’s official record.