FINRA Expungement Proceedings

SYK attorney Darlene Pasieczny Presents on FINRA Expungement Proceedings at PIABA’s Mid-Year Meeting.

On April 4, 2019, I joined co-panelist Kate McGrail and moderator Robert J. Girard II in Washington D.C. Together, we presented on FINRA expungement proceedings to an audience of securities attorneys, law professors, and state securities regulators attending PIABA’s Mid-Year Meeting.

Our main topics included:

  • The process for brokers to request expungement of customer dispute information from a broker’s CRD record.
  • The process for customer claimants to object to the request.
  • Proposed rule changes being considered by FINRA.

Current FINRA Rule 2080 of the Code of Arbitration Procedure for Customer Disputes provides the narrow grounds for expungement requests. FINRA Regulatory Notice 17-42 describes the potential changes including:

  • Limiting the time in which brokers may request expungement.
  • Creation of an Expungement Arbitrator Roster, with enhanced arbitrator qualification requirements, to hear expungement requests.
  • Requiring an additional finding that the customer dispute information has no investor protection or regulatory value.

The CRD is the Central Registration Depository, an online licensing and registration system for brokers and securities firms. Pursuant to FINRA rules, certain disclosure information must be reported for inclusion in the CRD record. This includes customer disputes – customer complaints, arbitrations and court actions.

Expungement of customer dispute information from a broker’s CRD record also means that the information is no longer publicly available through FINRA’s free online BrokerCheck. Because FINRA is clear that expungement is an “extraordinary remedy.”

That is in part because BrokerCheck is considered a major tool for investors to research the background of a financial professional. Wouldn’t you want to know if the person you are going to trust with your savings has a record of multiple customer complaints? Brokerage firms and state and federal securities regulatory agencies also use the CRD record when making hiring and licensing decisions, as well as in enforcement actions.

Darlene Pasieczny’s practice at Samuels Yoelin Kantor LLP focuses on all stages of corporate and securities law issues, securities litigation and FINRA arbitration, as well as fiduciary litigation in trust and estate disputes, and elder financial abuse.

Investor Alert: Kevin Winder Lesson – Beware of Promised High Return Investments

Oregonian article alerts investors to the dangers of high return investments

The Chief of Enforcement at the Division of Finance and Corporate Securities Consumer & Business Services Department (DFCS), Van Pounds,  was both quoted in Molly Young’s recent Oregonian article about high return investments and Salem investment adviser Kevin Winder.  Winder lost his license for selling promissory notes to clients in businesses in which he had a personal interest. Misrepresenting investments is not a new storyline, but it is uniquely tragic for every new set of victims. You can read the full story here.

Use caution when advisors recommend alternative Investments with high return rates

As a general rule Banks says, “If you can’t sell your investment at will, and you can’t find out its true value on any given day, then you should avoid it. Some private investments are certainly legitimate, but so many of them involve far more risk than the investor understands. Don’t risk it unless you really understand the potential for loss.”

Investor Defender attorney Darlene Pasieczny represent investors in securities industry disputes in FINRA arbitrations across the U.S. The Investor Defenders at Samuels Yoelin Kantor know the rules, and we fight for our clients in recovering investment losses. Contact us at 800.647.8130