FINRA recently put into place the highly publicized prohibition of making a settlement contingent upon a registered representative having the subject arbitration expunged from the representatives U-4.  Is this a good thing? 

The claimants’ bar thinks this is a good thing because it will prevent bad apples from having their records cleaned.  This position seems a bit silly since a case could only settle with that pre-condition if a claimant agreed to it.   

There is also the possibility that this rule change may have unintended consequences.  More cases may have to be tried to an award, thus causing claimants and respondents additional and unnecessary

There are times that the sheer economics of a boarder-line claim should be settled, but those cases may not settle anymore because those cases will now stay on the representative’s record unless a panel awards expungement as part of its award.  In other words, without having expungement as part of the settlement, registered representatives will likely prefer taking arbitrations to award. 

The only party who may be the winner as a result of this change may be FINRA, who will earn more forum fees from arbitrations that are tried to an award, where they would not have been in the past.   

The only solution for registered representatives is to avoid being a respondent.  Of course, there is no guarantee, but there are many things that you can do to avoid risk – a subject that I have written about.  Put the odds in your favor, avoid risk and avoid being an unfortunate respondent that must try arbitrations to award to be vindicated.

* photo from