Advisors Pursuing Customer Dispute Expungements Before September Will Pay a Fraction of the New Cost

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As published in the Federal Register, on June 1, 2020, the SEC approved FINRA’s proposed Rule changes to the customer dispute expungement process. Release No. 34—88945; File No. SR—FINRA—2020—005. 

In short, the following provisions of the recently-approved Rule apply to all matters in which expungement of a customer dispute disclosure is requested as a claim or counterclaim:

  • The minimum filing fee assessed by FINRA against the party seeking expungement relief is set at $1,575.
  • The minimum initial prehearing conference (IPHC) session fee is set at $1,125.
  • The minimum hearing session fee is set at $1,125 per hearing session.
  • The minimum process fee, assessed against the respondent(s) member firm(s), is set at $3,750.
  • The member surcharge, assessed against the respondent(s) member firms(s), is set at $1,900.

Here’s a comparison of existing fees with the new, increased fees:

The fee increases ultimately raise the average cost of expungement by approximately $9,200 in total, all of which goes straight into FINRA’s pockets. In matters where both expungement and monetary relief are requested, the new Rule requires that parties are assessed “the greater of” either the fee associated with the monetary claim, or the new minimum fees outlined above.

FINRA’s fees saddle claimants with costs above and beyond that of hiring representation for the expungement process, which currently runs anywhere from $10,000 to $20,000 per customer dispute.

The new Rule also speaks to a deviation away from evenly splitting hearing session fees among the parties and a shift toward assessing hearing session fees against the party requesting expungement.

When will those requesting expungement become subject to the 3,690% increase in forum costs?

These increased fees will go into affect on September 14th. Allowing a mere 3-4 weeks for due diligence, drafting, and filing the claim requesting expungement relief, those interested in avoiding the higher fees are encouraged to engage before September. 

Being that member firms will likely pass along any increased costs to the claimant advisors, the new Rule is anticipated to have a detrimental effect on the viability of expungement claims pursued after the new Rule becomes effective.

A full summary of the proposal can be found here. 

Give us a call at (303) 952-4025 for a free consultation.

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