OUR ATTORNEYS HELP BROKERS NATIONWIDE WITH EXPUNGEMENT PROCEEDINGS
Broker and investment advisor records are now generally available to the public through the BrokerCheck tool on FINRA’s website, so it is extremely important to protect your reputation.
It is unlikely that you will gather many new clients if they find negative comments about you in the public record.
The filing of a public complaint may also trigger Registration Problems with state agencies. If a customer files a false claim, a claim that is clearly erroneous, or a claim about a transaction in which you were never involved, then you may have the right to have that negative information expunged from the Central Depository Record (CRD).
When a complaint arises out of a defective structured product designed by your employer, you may be able to expunge that claim as it is not a sales practice violation, forgery, theft, misappropriation or conversion of funds.
In order to do so, you need an attorney experienced in not only FINRA arbitration proceedings but one who has handled state court litigation matters since it is a two-step process in both forums.
The attorneys at the Law Offices of Robert Wayne Pearce, P.A. have been helping brokers and financial advisors nationwide clear their name through expungement proceedings from our Boca Raton, Florida offices.
ATTORNEY PEARCE WILL ANSWER YOUR QUESTIONS ABOUT EXPUNGEMENT
Attorney Pearce has over 40 years of experience handling FINRA arbitration proceedings for investors and brokers and knows the difference between valid and frivolous complaints that should be removed from a broker’s record.
He is available to answer all of your questions, but some of the more frequently asked questions and answers about expungement are set forth below:
1. What types of information can be expunged?
The information that is typically expunged arises out of disputes between customers and member firms or their associated persons that have been reported on Forms U-4 and U-5 by the brokerage firm in response to those claims.
Complaints about defective structured products may also be expunged. On occasion, brokerage firms themselves publish defamatory material and engage in Form U-5 Abuse, which may be expunged.
2. What steps should one take to seek expungement?
If a party seeking expungement is involved in an arbitration proceeding, he or she should request expungement in his or her answer, counterclaim, or statement of claim.
The arbitrators will decide whether to grant a request for expungement on the basis of one or more of the 3 standards specified in Rule 2080 of the FINRA Code of Arbitration Procedure.
This rule spells out special procedural requirements relating to requests to expunge customer dispute information, including that the arbitrators hold a recorded in-person or telephonic hearing, review settlement documents, and consider the amount of payments made to any party in any other terms and conditions of settlement.
If the arbitrators grant expungement relief, they are also required to briefly explain in the award the factual bases for finding that the expungement is appropriate under one or more of the Rule 2080 standards.
3. What are the findings that arbitrators must make for expungement?
Arbitrators have the ability to order expungement for a variety of reasons. However, if a party does not want FINRA to challenge the expungement order and waive participation in any subsequent court confirmation proceeding, the arbitrators must affirmatively find that the subject matter of the claim or the information in the CRD system meets one or more of three standards:
i. The claim, allegation, or information is factually impossible or clearly erroneous.
ii. The registered person was not involved in the allegedly investment-related sales practice violation, forgery, theft, misappropriation, or conversion of funds.
iii. The claim, allegation, or information is false.
4. If the arbitrators awarded expungement, what is the next step to clear the record?
First, the party seeking expungement needs to send a letter to FINRA formally requesting a waiver of any participation in any court confirmation proceeding along with the relevant documents, such as the statement of claim, the answer, any settlement agreement, the arbitration award, and any other relevant documents. The staff will review the submission and either grant or deny the waiver request. If FINRA denies the waiver request, a party can still proceed with the expungement but must name FINRA as a party to the court proceeding. FINRA and State authorities can both challenge the expungement and a judge will decide whether it is in the public interest to have your record expunged.
5. Can a record be expunged without a court proceeding?
FINRA may expunge, without a court order, expungement directives contained in arbitration awards rendered in disputes between registered representatives and firms in which the arbitration panel states that the expungement relief is being granted because of the defamatory nature of the information; i. e., in cases involving Form U-5 Abuse.
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FINRA expungement proceeding rules and procedures are changing to make it more difficult and expensive to expunge unfounded customer complaints and false and defamatory statements on brokers’ CRD and BrokerCheck records. These changes are in response to sharp criticism from the public about the large number of expungements for so-called “rogue brokers” and other abuses, including the $1 damage request to trigger the lowest $50 filing fee and simplified one-arbitrator expungement proceeding.
Once the first change has been put into effect, no longer will brokers be able to include $1 in damages along with their request for expungement in order for their claim to fall under the low end of FINRA’s graduated filing fee (and hearing fee) schedule. Instead of paying a $50 filing fee, brokers will now be charged $1,575 (and broker-dealers will be hit with a $3,750 processing fee and $1,900 surcharge, all for being named as a nominal respondent in the proceeding).
FINRA has voted upon and submitted new rules to the SEC for approval which: 1) require an expungement request to be filed two years after the customer dispute ends; 2) all expungement requests to be heard by special panels of three arbitrators; and 3) require all brokers to testify in-person or via videoconference – not telephonically (although customers will still be permitted to appear telephonically or through a written statement).
Undoubtedly, the specially trained three-arbitrator panels will tighten the rules and place a heavy burden on those brokers who deserve and seek expungement, which is all the more reason why you will need a skilled and experienced trial lawyer to represent you in expungement proceedings going forward.
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