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Legal Updates for Securities and Investments

FINRA Announces Effective Date for New Procedures for Expungement Requests

Legal Updates for Securities Litigation – August 16, 2023

August 16, 2023

by Samuel E. Cohen and Ryan P. Friel

On August 11, 2023, FINRA published Regulatory Notice 23-12, which offers guidance on recent rule amendments to FINRA Rules 12800 and 12805 related to the expungement of customer dispute information from BrokerCheck. 

The below rule amendments become effective on October 16, 2023. 

  • Straight-in requests (an expungement where a broker files an arbitration case against their current or former brokerage firm requesting the expungement of a client complaint) be decided by a three-person panel that is randomly selected from a roster of experienced public arbitrators with enhanced expungement training (Special Arbitrator Roster);
  • Prohibit parties to a straight-in request from agreeing to fewer than three arbitrators to consider their expungement requests, striking any of the selected arbitrators, stipulating to an arbitrator’s removal, or stipulating to the use of pre-selected arbitrators;
  • Provide notifications to state securities regulators of all requests to expunge customer dispute information and a mechanism for state securities regulators to attend and participate in expungement hearings in straight-in requests;
  • Impose strict time limits on the filing of straight-in requests;
  • Specify procedures for requesting expungement of customer dispute information during simplified customer arbitrations;
  • Codify and update the best practices in the Notice to Arbitrators and Parties on Expanded Expungement Guidance (Guidance) applicable to all expungement hearings, which include establishing additional requirements for expungement hearings, facilitating customer attendance and participation in all aspects of the expungement hearings and codifying the panel’s ability to request any evidence relevant to the expungement request;
  • Require the unanimous agreement of the panel to issue an award containing expungement relief; and
  • Establish procedural requirements for filing expungement requests, which include on-behalf-of requests.

Brokers with old or dated customer disputes on their BrokerCheck report which are not part of an existing arbitration claim should consider filing an expungement before October 16, 2023, to avoid the forthcoming onerous expungement proceeding requirements. 
 

 

Legal Update for Securities Litigation – August 16, 2023, has been prepared for our readers by Marshall Dennehey. It is solely intended to provide information on recent legal developments, and is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. We welcome the opportunity to provide such legal assistance as you require on this and other subjects. If you receive the alerts in error, please send a note to tamontemuro@mdwcg.com. ATTORNEY ADVERTISING pursuant to New York RPC 7.1. © 2023 Marshall Dennehey. All Rights Reserved.

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