SEC Approves Amended FINRA Rule 2081 Prohibiting Settlements Conditioned on Expungement


On July 22, the SEC approved amendments to FINRA Rule 2081 that prohibit member firms from conditioning arbitration settlements (or seeking to) upon a customer’s assent to CRD expungement relief.  The Rule amendments prohibit paying any consideration or compensation for expungement relief and apply even if a customer suggests such a bargain.  SEC Rel. No. 34-72649 (July 22, 2014).  In cases that may warrant expungement relief under the conditions specified in Rule 2081, SIFMA’s comment letter suggested, and FINRA responded approvingly to, using settlement-agreement language reciting that:  (1)  Respondents intend to seek expungement relief; (2) expungement relief was not a condition of the settlement; (3) Respondents have not paid any consideration related to expungement; and (4) the Claimant may participate in expungement proceedings as (s)he chooses.  We addressed FINRA’s Rule proposal earlier this year in, “FINRA Moves to Make Expungement Independent” (May 14, 2014).

Topics:  Arbitration, Expungement, FINRA, SEC, Settlement

Published In: Alternative Dispute Resolution (ADR) Updates, Civil Remedies Updates, General Business Updates, Finance & Banking Updates, Securities Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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