FINRA Expungement Rule Approved by SEC

This week Financial Industry Regulatory Authority’s (“FINRA’s”) Rule 2081 (“the Rule”) was approved by the Securities and Exchange Commission (“SEC”). The Rule will prohibit the expungement of customer complaints, due to agreed-upon settlements with customers, through the Central Registration Depository (“CRD”) System. CRD is operated by FINRA and includes important disclosure information such as criminal matters and disciplinary actions related to the firm and its representatives. While the passage of the Rule will make expungements more difficult for brokers they will still have the ability to pursue them via other FINRA rules and procedures.

According to Richard Ketchum, FINRA’s Chairman and Chief Executive Officer, “This rule will prohibit firms and representatives from conditioning settlements on a customer’s agreement not to oppose the expungement, thus protecting the integrity of the CRD system and disclosure of material information to investors.

The approval of this rule is seen as a win for investor protection advocates as it provides investors with the most accurate information available to assist them in their investment decisions. The SEC remarked that the Rule “should help assure that accurate and complete customer dispute information remains available to the investing public, regulators, and broker-dealers.”

The SEC also is encouraging FINRA to review its expungement rules and procedures to ensure that no further rulemaking is necessary. FINRA will announce the effective date of the Rule in a regulatory notice within two (2) months and Core Compliance will continue to report as information becomes available.

For further information on this and other related subjects, please contact us at (619) 278-0020 to schedule a consultation.

GENERAL DISCLAIMER: Information contained within this blog does not create a business-client relationship, and none of the content of this blog can be deemed to be consultive business advice.


Leave a Reply

Your email address will not be published. Required fields are marked *