So Your FINRA Expungement Got Approved. What Next?

So Your FINRA Expungement Got Approved. What Next?

If you have an inaccurate or erroneous customer dispute on your broker’s record, getting it expunged is a no-brainer. But the FINRA expungement process isn’t easy. In fact, the agency calls expungement an “extraordinary remedy” to be used only in limited cases.

But let’s say you brought on an experienced legal team who helped you meet FINRA’s requirements for expungement. The agency has given you the green light to expunge the inaccurate customer dispute off your record. Congratulations on your approval!

Unfortunately, the process doesn’t end there. You must still take steps to get the customer dispute removed from the Central Registration Depository (CRD) according to the terms of your expungement. Your lawyer can help make sure this process gets carried out.

In order to actually remove a customer dispute from the CRD, you must be able to show an affirmative judicial or arbitral finding for expungement. In most cases, a decision-maker such as a state or federal court judge must confirm the expungement.

You can get a FINRA expungement if you can prove one of the following:

• The claim against you is factually impossible or clearly erroneous,
• You weren’t actually involved in the violation, forgery, theft, misappropriation, or conversion of funds as alleged in the claim
• The allegation or information in the claim is false.

Expungement requests must generally be filed within 6 years after a customer complaint has been filed. But in some cases, FINRA arbiters may choose to ignore this time limit.

Keep in mind that if you were previously denied an expungement request for that specific customer complaint – for example, in a lawsuit – FINRA will automatically dismiss any future requests unless you can show a substantial or compelling reason to revisit the issue.

You can file a request for expungement with FINRA like any other arbitration proceeding. The customer who originally filed the complaint gets notice of your expungement request and has the chance to actually participate in the proceedings. The agency follows a streamlined version of its usual arbitration process to handle expungement requests. Your attorney may submit pleadings or motions, you may have limited discovery, and there may be hearings.

If an outside court (such as a state or federal court) hears your expungement request as part of another matter or litigation, FINRA recommends that judges follow the same standards under Rule 2080 as the agency. However, this is not required. Member firms seeking an expungement in this way may also be required to name FINRA as a party in the matter unless they qualify for an exception under the agency’s rules.

If FINRA decides to grant your expungement request, the arbiter who heard your case must produce a written decision explaining how you’ve satisfied FINRA Rule 2080.

Steps to Take After FINRA Issues Expungement

Once FINRA has approved your expungement, you must have the decision confirmed by a court order from a court with competent jurisdiction – i.e., a state or federal court. The customer complaint you want to expunge will actually remain on your firm’s CRD and BrokerCheck records until this court order is presented to FINRA.

If you included FINRA as a party to a state or federal court proceeding where expungement was granted, this final step will essentially be “baked into” the process and you do not need additional court confirmation. FINRA may also waive this requirement if the basis of expunging the customer complaint is proven to be defamation. An experienced attorney can help make the FINRA expungement process as streamlined and painless as possible while championing your best interests at every turn. If you’re seeking expungement, Scarinci Hollenbeck can help. Click here to contact our FINRA lawyers now.