FINRA's Stacked Deck

A Stacked Deck: Inside the 2019 FINRA New Customer Dispute Expungement Process

The House always wins. FINRA has filed rule changes to strip financial advisors of a critical right.

News that expungement of qualified customer disputes was under fire from the regulators first became known on December 6, 2017; when FINRA published Regulatory Notice 17-42. Since then, the industry has been anxiously waiting for the FINRA Board of Governors to tell the industry precisely what changes will be implemented in the final Rule. On October 3rd the Board of Governors once again offered nothing more than assurances that, 

The Board approved amendments to the Code of Arbitration Procedure to create, among other things, a roster of arbitrators with enhanced training and experience from which a panel would be selected in certain instances to decide an associated person’s request to expunge customer dispute information.”

Where Can I Read the Rule Filing For Myself?

As of the writing of this article, FINRA has yet to file the proposed Rule changes with the Securities Exchange Commission (SEC) electronically. According to the FINRA Rulemaking Policy, the rule filing will be posted on the FINRA website here within two business days of filing with the SEC.

The new “arbitrators with enhanced training” model currently being advanced with the SEC strips financial advisors of their valuable and critical right to choose their own arbitrator.

What are arbitrators with “enhanced training”?

FINRA has provided Advanced Arbitrator Training (“AAT”) for several years. AAT includes Expungement Training which is then noted on each arbitrator’s disclosure report. However, the selection and appointment of these “arbitrators with enhanced training” by FINRA Neutral List Selection System (“NLSS”) means that FINRA will now choose the arbitrators rather than the parties. In all other industry disputes litigated within the FINRA arbitration forum, each side is allowed to preference and strike potential arbitrators from the list provided by FINRA. 

The new “arbitrators with enhanced training” model currently being advanced with the SEC strips financial advisors of their valuable and critical right to choose their own arbitrator. ​

When Do The Changes Go Into Effect?

​The proposed Rule changes can either go into effect after the SEC publishes the Rule in the Federal Register and opens a 21-day comment period; or, the Rule may be “filed for immediate effectiveness” and the SEC reserves the right to summarily or temporarily suspend the change for a 60-day period. 

Either way, once the SEC approves of the Rule change and places its official announcement in the Federal Register, the changes are permanent for all intents and purposes.

Can an Expungement Request Still Be Filed Under the Existing Rules?

Time is seriously running out. Being that an expedited preparation and filing of an expungement claim can still take up to 14 days under the best circumstances, you leave yourself no wiggle room. Choosing to wait until the SEC posts the notice will put you in the rather precarious position of filing an expungement case under a set of rules that are not nearly as favorable as they currently are for the advisor.

Improve your hand.
Contact us by Phone at (303) 952-4025 for a free consultation as to the viability of your case. We win nearly 90% of our cases, and we can give you an honest assessment as to what it would take to remove disclosures from your BrokerCheck.