In the News: FINRA Board Proposes Rule to Curb Record Expungement

FINRA’s Board of Governors recently approved a rule proposal that prohibits firms and their representatives from conditioning dispute settlements on customer agreements regarding expungement of the customer complaints from the brokers’ FINRA records.

Previously, arbitration settlements could include conditions requiring customers to agree not to oppose an industry party’s request for expungement of the industry party’s FINRA records relating to the customer’s complaint against that party. These records include a listing of the party’s “personal, registration and employment history, as well as disclosure information such as criminal matters, regulatory and disciplinary actions, civil judicial actions and information relating to customer disputes.” When a record is allowed to be expunged without opposition, past complaints may not be visible for future customers, preventing such investors from being fully informed when they make their decision to invest with a new broker. The rule proposal is intended to ensure more comprehensive recordkeeping to protect investors from being misled and to allow customers to approach brokers with a more complete understanding of their background.

The rule proposal to curb records expungement will next be submitted to the SEC to allow for review, public comment, and eventual approval.

Much of the records information mentioned here is available through the website Broker Check. If you would like to see the public records of your broker or brokerage firm, visit Broker Check and use the search function to find their specific records. Click on “Get Detailed Report” to see specific information regarding disputes and disciplinary actions, as well as general personal and employment history.

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