When a broker is named as a respondent in a customer-initiated arbitration, the arbitration claim and any allegations of wrongdoing are required to be reported on the broker's Form U4. Brokerage firms must submit a disclosure report when a broker is the "subject of" allegations of sales practice violations made in arbitration claims or civil lawsuits, but is not a named party to the arbitration or lawsuit. Once reported, this information is recorded on the broker's record in the Central Registration Depository (CRD®) System and becomes available to the public upon request through FINRA's BrokerCheck program.
Brokers may seek to have a reference to allegations or to involvement in an arbitration removed from their CRD® System records. The process of removing this information from the CRD® system is called "expungement."
FINRA Rule 2080 contains standards and procedures for expungement of customer dispute information from CRD. The rule requires that a court of competent jurisdiction confirm an arbitration award granting expungement relief or order such expungement. It also requires that firms or associated persons name FINRA as an additional party in any court proceeding in which they seek an order to expunge customer dispute information or request confirmation of an award containing an order of expungement. FINRA will generally oppose confirmation of the expungement portion of the arbitration award in most cases in which it participates in the judicial proceeding.
Upon request, however, FINRA, in its discretion, may waive the requirement to name FINRA as a party in these proceedings provided the arbitration award directing expungement contains at least one of the following judicial or arbitral findings:
FINRA Rules 12805 and 13805 provide enhanced safeguards to ensure that arbitrators have the opportunity to consider the facts that support or weigh against a decision to grant expungement. These rules also provide that expungement occurs only when the arbitrators find and document one of the narrow grounds specified in FINRA Rule 2080. Under FINRA Rules 12805 and 13805, the panel must follow the outlined procedures in order to grant expungement of customer dispute information under FINRA Rule 2080:
View the following for additional information: