Why and When Registered Representatives Should Consider Seeking Expungement

Expungement is the removal of certain disclosure events on a registered representative’s record – primarily customer complaints and arbitrations, and in some instances employment termination explanations. Once a disclosure event is expunged, it is no longer accessible by prospective employers or by the general public.

Financial advisors should consider seeking expungement to:

Protect Your Reputation. All disclosures listed on FINRA’s Central Registration Depository (“CRD”) are available to prospective employers. Many types of disclosures are also accessible to the general public (i.e., current and potential customers) through FINRA’s BrokerCheck portal. These public disclosures often include detailed information on the allegations associated with involuntary terminations, customer complaints, and FINRA arbitrations.

Set the Record Straight. In most instances, registered representatives have no control over disclosures, even when they are false, defamatory or erroneous. It is not uncommon for firms to resolve customer-related complaints and arbitrations without input from registered representatives. Even if the complaints and arbitrations are denied and the firm believes you did nothing wrong, these disclosures become part of your permanent record unless expunged.

FINRA Rule 2080 addresses the circumstances upon which expungement of customer dispute information is appropriate:

1. The claim, allegation, or information is factually impossible or clearly erroneous;

2. The registered representative was not involved in the alleged investment-related sales practice violation, forgery, theft, misappropriation, or conversions of funds; or

3. The claim, allegation, or information is false.

Expungement is requested and ruled upon initially by an arbitration panel. If the disclosure stems from a pending arbitration, the registered representative can typically request expungement in the context of that pending arbitration. If the disclosure does not stem from a pending arbitration, the registered representative must file a separate arbitration requesting expungement. Expungement Awards relating to customer disputes must be presented to a Court, who then enters an Order effectuating the expungement from the CRD.

Seeking expungement requires competent legal counsel to fully evaluate the merits of the expungement request and the handling of the expungement arbitration and subsequent Court proceeding. The attorneys at DWH Legal have handled hundreds of FINRA arbitrations, including a multitude of FINRA expungement cases. We understand the standards and nuances of what FINRA panels require to recommend expungement. Through our representation in expungement cases, we have assisted our clients in preserving their ability to obtain clients and employment and protecting their reputation with customers by having their records expunged.

If you have any concerns about problematic disclosures on your CRD, contact the attorneys at DWH Legal for a no-commitment consultation. To learn more about our firm’s expungement practice, please click here and contact us online or by phone at our office located in Chicago at 312.380.6587.