In re, BrokerCheck: SIFMA urges Finra to expand 'in re expungement

Association wants to make it easier for brokers to clean up their official records

May 25, 2012 @ 3:04 pm

By Dan Jamieson

The Securities Industry and Financial Markets Association wants Finra to establish a process by which individual brokers could expunge unproved customer complaints from their disciplinary records.

"A fair and efficient expungement remedy should be available to all registered persons that are the subject of unfounded claims," SIFMA associate general counsel Kevin Carroll wrote in a letter to the Financial Industry Regulatory Authority Inc. this week.

The letter came in response to a request for commentby Finra for a proposal that would allow representatives to expunge arbitration claims from their BrokerCheck records when they were not personally named in the claim.

In 2009, Finra required individual brokers to report any arbitrations in which they are involved, even if they are not a named party. This change closed a loophole that allowed brokers to avoid disclosing many customer claims.

As a result, however, representatives have had no way of challenging a claim in which they are not named, other than by asking their firm to seek expungement on their behalf, seeking to intervene in the case or filing an entirely new arbitration claim requesting expungement.

In proposing the so-called "in re" expungement process last month, Finra said it had received numerous inquiries from brokers who felt that an arbitration claim was unfounded or that they were incorrectly identified as the alleged violator.

The comment period closed Monday.

SIFMA wants the in re process expanded to any type of complaint in addition to arbitration claims.

"SIFMA believes that the continued disclosure of denied or unfounded written customer complaints serves no regulatory purpose," Mr. Carroll wrote, noting that unproved complaints remain on a broker's public record as long as the individual is registered and for 10 years after he or she leaves the industry.

The Public Investors Arbitration Bar Association, which represents plaintiff's attorneys, is worried that an in re process might force public customers to go through another arbitration process, and urged Finra to limit the expungement proceedings while giving customers an opportunity to challenge the request.


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