Securities attorneys routinely are asked by people in the securities industry a form of this question: “how do I get rid of the marks on my license.” Typically, registered representatives are talking about the fact of life in the securities industry where every time some customer makes a claim, regardless of how baseless it may be, it will end up on the person’s CRD record. Once there, it is nearly impossible to expunge.
Nonetheless, FINRA has developed over the years a process whereby a registered representative may bring an arbitration proceeding to request expungement of these items. Such an expungement is, unfortunately, very difficult to obtain for many reasons, among others, the cost, high standards of review, and the fact there may be objections from a number of sources. However, some registered representatives have not been dissuaded.
In particular, a recent FINRA arbitration panel ruled in favor of a registered representative, and expunged his record. See https://www.finra.org/sites/default/files/aao_documents/17-01429.pdf. In the Molinari matter, the registered representative was seeking expungement for some very old claims. The customers and settlement agreements were not available given the age of the claims, and he no longer was working at the broker-dealer where the complaints were first registered. To ensure the registered representative had at least an opportunity to be heard, the FINRA arbitration panel permitted the proceeding to move forward with the named respondent being that of the registered representative’s current firm. The panel then reviewed the claims, and the registered representative’s involvement in said claims. After hearing the evidence, the panel found that the claims should be expunged from the registered representative’s CRD records.
In short, with the arbitration panel’s willingness to look at the actual substance of the matter and not some formulaic process, it accomplished the ultimate goal of ensuring an accurate CRD system. We hope other arbitration panels follow suit.