How Do You Request Expungement if the Parties Settle the Arbitration?

Requesting Expungement in a FINRA Settlement Arbitration

In the highly competitive financial world, any organization, manager, or owner must ensure that your business’s Central Registration Depository (CRD) doesn’t have negative customer complaints. If you are looking for FINRA settlement solutions, keep reading.

Public investors often consult CRD through FINRA BrokerCheck before making investment decisions. The CRD system holds administrative data and disclosure information, including civil judicial actions, customer disputes, and regulatory disciplinary actions filed against your organization. It can be challenging to remain clean of any customer dispute in business, and such complaints can deny you or your firm significant business opportunities.

But worry not! If you are a registered representative and have a derogatory, false, factually impossible, or erroneous customer complaint on your CRD record, you can follow FINRA’s settlement procedure for expungement to have that information in the CRD system removed. An experienced FINRA expungement attorney can help you request expungement and ensure a successful FINRA arbitration settlement.

If you’re seeking to expunge any false or defamatory CRD disclosures on you, or your firm, through FINRA arbitration settlement, you must understand the process for successful expungement. This could include presenting a strong counterclaim or statement of claim to the arbitrators. 

The arbitrators will analyze the facts of your statement against the derogatory complaints on your CRD database to determine whether to grant your request for expungement. Then, the arbitrators will decide your case based on at least one standard specified in FINRA’s Rule 2080. An experienced expungement attorney can understand the complexities of expungement and how to file a strong claim.

The expungement is a two-section process. Firstly, you initiate the expungement process through the FINRA Dispute Resolution Process, specifying the derogatory claim in the CRD you want to be removed. Next, a hearing is set to review the merits of your expungement request based on whether the evidence you provided attains one or more grounds for expungement. Arbitrators handling your FINRA arbitration settlement will hold a hearing session, virtual or in-person, and review all necessary documents. Arbitrators then conclude the process with a written settlement explaining reasons for denying or granting your expungement request. 

In any FINRA settlement, the panel must review the amount paid to settle the claim, among other factors, and whether the issue is presented to a state court or arbitrators. According to the FINRA Notice to Members 08-79, the panel needs to consider any other terms and conditions of the complaint that can raise issues about your business’s involvement in the alleged misconduct before granting an expungement. 

FINRA Rule 2080 Grounds for Expungement

Rule 2080 outlines the grounds under which an expungement can be granted:

• The complaint or allegation is erroneous or factually impossible: Under this circumstance, you’ll be required to provide credible evidence indicating that your organization wasn’t involved in the alleged violation, customer mistreatment, conversion of funds, or misappropriation. A possible illustration of a customer dispute involves naming a registered representative in a claim when the said representative inherited the account and wasn’t responsible for the said allegations. 
• The complaint or allegation contains false information: This involves where the complaint in the system contradicts the credible evidence presented by the registered representative. For instance, if a customer complaint states that a broker or an institution conducted unauthorized business, the broker can prove that the customer ordered the alleged unauthorized dealings in writing. 

If your FINRA settlement succeeds in the arbitration stage, you must file a petition with a local or federal court with FINRA as the defendant, requesting the court to confirm the arbitrator’s decision to grant the expungement, unless FINRA grants a waiver. After reviewing your petition, the court will order FINRA to comply with the expungement decision by erasing the erroneous, factually impossible, and false information in question from the CRD database. 

Brokers can seek successful expungement of customer disputes or allegations on a CRD report. However, seeking expungement on FINRA settlement can be daunting when you don’t understand the complexities of expungement or the process required. Nevertheless, the FINRA settlement process can be easier if you partner with experienced expungement attorneys. 

At Scarinci Hollenbeck, LLC, we have experienced and fierce advocates committed to delivering practical and creative solutions to all our clients. The team understands the intricacies of the business world and can help you expunge an allegation from the CRD database. Contact us to discuss further with a member of our team.