Over the course of the next 18 months, FINRA will proceed on two tracks regarding the removal of negative information from broker records.
FINRA submitted to the Securities and Exchange Commission a rule proposal to facilitate the process for brokers who are not named in a case to expunge their records, where there was a full hearing and a decision by arbitrators. FINRA will also consider additional rules for arbitrators to consider in granting expungement relief, and if there should be a change in the standards. Under current FINRA rules, broker-dealers must disclose when they are implicated in sales practice violations in arbitration claims or civil lawsuits, even if they are not named as parties in the arbitration or suit. The information is recorded in FINRA’s Central Registration Depository, and is publicly available upon request through the BrokerCheck program. Brokers may seek to remove– or expunge– the records through a court order, or court confirmation of a FINRA arbitration panel’s grant of expungement relief. When reviewing its expungement rules, FINRA intends to consider if hearings will be necessary when expungement is a result of settlement between the parties.
In sum, this may be good news for the industry!!