While it is possible for brokers to leave an explanatory comment regarding information recorded in the BrokerCheck database, the most effective remedy is expungement of customer dispute information from the database. A successful expungement request removes the dispute record entirely from both the CRD and BrokerCheck.
Brokers that have records of customer disputes in the CRD and BrokerCheck databases should strongly consider taking action now to correct these blots on their professional reputation. In fact, petitions seeking expungement are particularly well-timed, in view of recently proposed FINRA rule changes that threaten to make expungement of customer dispute information more costly and difficult to obtain.
Web CRD is a secure database that is available to broker-dealer firms as well as state and federal regulators.
BrokerCheck, a well-publicized source of information for investors, is derived from CRD records.
In the area of customer dispute information, the data in CRD and, by extension, BrokerCheck, is derived from the disclosures that brokers make on FINRA Form U-4 (Uniform Application for Securities Industry Registration or Transfer) and brokerage firms make on FINRA Form U-5 (Uniform Termination Notice for Securities Industry Registration). The Financial Industry Regulatory Authority requires disclosure of any consumer-initiated, investment-related arbitrations and civil litigation proceedings, regardless of outcome or whether they are still pending. These records persist in CRD and BrokerCheck permanently. The only way to remove them is by filing a request for expungement with FINRA.
Several additional procedural requirements are contained in FINRA Rule 12805, which governs the workings of arbitration panels. In order to grant expungement of customer dispute information under Rule 2080, the arbitration panel must make the required Rule 2020 findings plus:
Under FINRA Rule 12401, customer claims of more than $100,000, as well as claims that do not specify an amount and do not request money damages, are heard by three-person arbitration panels. Claims that are $50,000 or less are heard by one arbitrator. Claims that are more than $50,000 but not more than $100,000 are heard by one arbitrator, unless the parties agree to a three-person arbitration panel.
After obtaining an arbitration award granting expungement relief, the broker must subsequently seek judicial confirmation of the award from a court of competent jurisdiction, and then, after obtaining a court order, return to FINRA to have the disclosure expunged from the CRD and BrokerCheck systems.
FINRA, in late 2017, proposed sweeping changes to the procedures for obtaining expungement of customer complaint information from the CRD and BrokerCheck databases. The intent of the FINRA proposal was to respond to widespread criticisms that expungement is too easy to obtain and that sanitized broker records were putting the investing public at risk.
The Securities and Exchange Commission released largely supportive comments earlier this year. If adopted, FINRA’s new procedures will make it significantly more difficult to obtain expungement of customer complaints.
While it is possible for brokers to leave an explanatory comment regarding information recorded in the BrokerCheck database, the most effective remedy is expungement of customer dispute information from the database. A successful expungement request removes the dispute record entirely from both the CRD and BrokerCheck.
Brokers that have records of customer disputes in the CRD and BrokerCheck databases should strongly consider taking action now to correct these blots on their professional reputation. In fact, petitions seeking expungement are particularly well-timed, in view of recently proposed FINRA rule changes that threaten to make expungement of customer dispute information more costly and difficult to obtain.
Call an U5 Expungement Lawyer at Wolper Law Firm today.
1250 S. Pine Island Road
Suite 325
Plantation, FL 33324
Phone: (800) 931-8452
(954)-406-1231
We represent clients nationwide, including, but not limited to: Miami, Boca Raton, West Palm Beach, Sarasota, Tampa, Stuart, St. Petersburg, Vero Beach, Orlando, Jacksonville, Austin, Houston, Dallas, Washington DC, Charlotte, Boston, Baltimore, Phoenix, Scottsdale, Las Vegas, Los Angeles, San Diego, San Francisco, Chicago, Seattle, Portland, Denver, Salt Lake City, Fargo, Atlanta, Little Rock, Newark and St. Louis
We represent clients nationwide, including, but not limited to: Miami, Boca Raton, West Palm Beach, Sarasota, Tampa, Stuart, St. Petersburg, Vero Beach, Orlando, Jacksonville, Austin, Houston, Dallas, Washington DC, Charlotte, Boston, Baltimore, Phoenix, Scottsdale, Las Vegas, Los Angeles, San Diego, San Francisco, Chicago, Seattle, Portland, Denver, Salt Lake City, Fargo, Atlanta, Little Rock, Newark and St. Louis
Hold a recorded hearing session (by telephone or in person) regarding the appropriateness of expungement.