Expungement Claims for Financial Services Professionals

All registered representatives’ disclosure records are maintained by FINRA in the Central Registration Depository (CRD). These disclosures are available to various regulators, potential employers, and in some cases, to prospective and current clients via FINRA’s BrokerCheck portal. These disclosure records contain detailed information relating to:

• Civil judicial actions and non-criminal court actions
• Criminal matters
• Customer disputes including complaints, arbitrations, and court actions
• Employment terminations
• Internal reviews conducted by firms
• Investigations conducted by regulatory organizations
• Financial matters, such as credit issues or bankruptcy
• Regulatory actions

Unfortunately, registered representatives have no power over what is included in these records, even when the disclosures are false, defamatory, or erroneous. For example, even in cases where a complaint against a registered representative was resolved or settled, the matter may still be disclosed on the registered representative’s record unless it is expunged. Likewise, a registered representative who is terminated has no control over his or her former firm’s disclosure, even if his or her involuntary termination may have been wrongful. This can have a severe impact on a financial professional’s reputation and standing in the profession—as well as may lead to additional regulatory scrutiny.

The Castle Law Firm assists financial professionals looking to expunge false, defamatory, and erroneous disclosures from their record. As a registered FINRA arbitrator, Rob Castle is able to view these issues through the lens of a decisionmaker, making him a great resource to advocate on your behalf where there is a basis for expungement of your CRD record.

Expungement, Explained

Expungement is the permanent removal of disclosure events from a broker’s CRD record. Expungement is often sought for customer disputes, employment terminations, or internal reviews. For example, when a registered representative is named as a party in a customer-initiated arbitration, that matter must be recorded on the registered representative’s Form U4 and CRD record. To protect the registered representative’s reputation, a registered representative may seek to have any reference to the arbitration removed from his or her CRD record. This process is known as “expungement.”

Expungement is generally considered to be an “extraordinary remedy” that is allowed only under very limited circumstances—such as if the disclosure has no meaningful investor protection or regulatory value. Once the disclosure is expunged, it is permanently deleted and no longer available to regulators, potential employers, current or prospective clients, or the investing public.

Court Order

Parties seeking expungement relief of customer-dispute information must obtain an order from a court that confirms the arbitration award containing expungement before FINRA will remove the information from a broker’s CRD record. FINRA generally participates in court confirmation proceedings and opposes confirmation of the expungement recommendation if it does not meet at least one of the Rule 2080 grounds, comply with Rule 2081, and satisfy the procedural requirements for Rules 12805 and 13805—though, FINRA may waive the obligation to be named as a party if it determines that expungement is based on one or more findings under Rule 2080.

Cases Inappropriate for Expungement

• Arbitrators decided in favor of the customers in a claim against a broker (known as an adverse arbitration award)
• Information that doesn’t fall under Rule 2080
• Customer allegations that relate to a single investment or product

Events That May Not Be Expunged

Certain disclosure events are not eligible for expungement from the CRD system, including:

• Civil judicial actions, or non-criminal cases which:
  • Involved a registered representative in connection with an investment-related activity;
  • Found that a registered representative violated investment-related statutes or regulations; or
  • Dismissed, per a settlement agreement, an investment-related civil action against a registered representative by a state or foreign financial regulatory authority
• Criminal matters, including charges and convictions for any felonies and misdemeanors, such as fraud, bribery, or wrongful taking of property
• Financial matters, including:
  • Bankruptcies and/or compromises with creditors within the past 10 years;
  • A bonding company denial, payment on a bond for a broker, or revocation of a bond for a broker; and
  • Unsatisfied judgments or liens
• Investigations and regulatory actions, including:
  • Investigations or proceedings conducted by a domestic or foreign government body or SRO with jurisdiction over investment-related matters;
  • Regulatory actions brought by federal, state, or foreign regulatory SROs, including findings or penalties imposed against a broker, and revocation or suspension of authorization to act as an attorney, accountant, or federal contractor.