Following consultations with the SEC staff, we temporarily withdrew from SEC consideration our rule filing establishing specialized arbitration panels for expungement requests so that we can further consider whether modifications to the filing are appropriate.
FINRA remains committed to working with the SEC and other stakeholders who share a common interest in revising the process for reviewing the information on a broker’s record in the Central Record Depository (CRD®). Protecting the integrity of the information in the CRD system and BrokerCheck® is critical to our mission of investor protection. FINRA is committed to limiting the expungement process so that it operates as intended—as an extraordinary remedy, only appropriate in limited circumstances when the CRD information is clearly inaccurate. We continue to take meaningful steps to enhance controls on the existing expungement process in the near term, including our specialized panels proposal, while we work concurrently to support the development of fundamental, multi-stakeholder solutions.
FINRA believes it is important to vigorously pursue both of these efforts simultaneously. First, as part of FINRA’s effort to revise the existing expungement process, the rule filing adopts a recommendation of the independent Dispute Resolution Task Force in its Final Report and Recommendations to establish an arbitration panel consisting of specially trained arbitrators. These arbitrators would decide proceedings where brokers seek to expunge customer dispute information separately from the arbitration of the underlying dispute, which typically do not involve the customer who raised the dispute. The rule filing would also provide notification to state securities regulators of expungement requests and create several additional safeguards for ensuring that information in the CRD system and disclosed through BrokerCheck is accurate and complete.
Second, concurrent with continuing our work on these near-term enhancements, we will continue our longstanding efforts with NASAA to support a redesign of the current expungement process. This redesign program involves multi-stakeholder solutions requiring more fundamental changes to the expungement process. To further this work, FINRA intends to release data, statistics and a discussion paper that analyzes expungement of broker information, before convening discussion groups regarding this information. We also look forward to including stakeholders with insight on the expungement process for investment advisers and other financial intermediaries, and we welcome any information they can provide to more fully inform a holistic view of the issues around expungement throughout the financial services industry.
