Earlier this month, the SEC approved the first of several rule changes that FINRA has proposed for the process governing the expungement of customer complaints from a broker’s record. The approved rule change will make it significantly more expensive for brokers (and their broker-dealers) who are seeking expungement.
Brokers will no longer be able to include $1 in damages along with their request for expungement in order for their claim to fall on the low end of FINRA’s graduated filing fee (and hearing fee) schedule. Instead of paying a $50 filing fee, brokers will now be charged $1,575 (and broker-dealers will be hit with a $3,750 processing fee and $1,900 surcharge, all for being named as a nominal respondent in the proceeding). To read more about the rule change, click here for my recent blog post.
FINRA has not yet released a regulatory notice regarding this change, but the rule is expected to go into effect later this summer. And, more proposed rule changes (outlined below) are expected to go to the SEC for approval later this year. So, any brokers who are interested in seeking expungement should consider doing so sooner rather than later.
- There will be stricter rules about how and when brokers can request expungement, although the rules will allow an expungement request to be filed two years after the customer dispute ends (not within one year, as FINRA originally proposed).
- Expungement requests will be heard by special panels of three arbitrators, but their decision will only need to be by majority (not unanimous, as FINRA originally proposed).
- Brokers will be required to testify in-person or via videoconference – not telephonically (although customers will still be permitted to appear telephonically or through a written statement).
Many changes will take place in the next year and a half, particularly as the future rules regarding expungement of customer dispute information are finalized. Keep an eye out for periodic updates from us. It will be interesting to see how all of the rule changes finally play out.
