PIABA's study underlines and emphasizes serious concerns FINRA shares with respect to the expungement process. As a result of these concerns, FINRA recently provided expanded guidance to assist arbitrators in the proper performance of their responsibilities with respect to expungement, and is enhancing arbitrator training with added emphasis on the importance of the integrity of the information in the CRD system.
The recent increase in expungement requests, as PIABA noted, is largely attributable to the 2009 change to the Forms U4 and U5 that increased the number of customer claims reported against brokers, and consequently in an increase in brokers pursuing expungement relief. While still significant, the number of arbitrator-recommended expungements executed by FINRA following a court order during the five-year period (838 orders) covered by the study is less than 5 percent of the total number of customer disputes filed (17,635).
In addition to the steps it is taking to provide additional guidance and training to arbitrators, FINRA is reviewing its rules and interpretations, and will consider changes to provide clarity as to what actions in connection with conditions on settlements violate conduct rules.
We appreciate PIABA's role and its efforts in this area. FINRA welcomes constructive input from all organizations that share our commitment to investor protection, and we will continue to take steps to make improvements to the arbitration and expungement process.