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Prohibited Conditions Relating to Expungement of Customer Dispute Information FAQ

Is there a rule that addresses prohibited conditions relating to expungement of customer dispute information?

Yes, FINRA Rule 2081 provides that no member or associated person shall condition or seek to condition settlement of a dispute with a customer on, or to otherwise compensate the customer for, the customer’s agreement to consent to, or not to oppose, the member’s or associated person’s request to expunge customer dispute information from the CRD system. 

Does FINRA Rule 2081 apply only to settlements?

No.  For purposes of FINRA Rule 2081, “settlement of a dispute” refers to any resolution or disposition of a customer dispute, including but not limited to, settlement agreements, voluntary dismissals, stipulated dismissals, and withdrawals of claims, as well as all oral and written agreements entered into or discussed during the course of settlement negotiations and any agreements entered into separate from such negotiations.

If I (or my employer) do not pay money or provide other consideration to a customer, can the parties’ agreement to resolve a customer dispute include a provision that the customer consents to or does not oppose a request for expungement relief without violating FINRA Rule 2081?

No.  Any provision in the parties’ agreement to resolve a customer dispute that the customer consents to or does not oppose a request for expungement relief is a violation of FINRA Rule 2081.

Does an agreement, reached at any time, to release a customer from claims in exchange for the customer’s agreement to consent to, or not to oppose, an expungement request violate FINRA Rule 2081?

Yes.  FINRA Rule 2081 applies to any oral or written agreement with a customer and is not limited to agreements entered into during settlement negotiations.  A member’s or associated person’s agreement to release a customer from any claim (real or potential; past or future) provides a benefit to the customer in exchange for the customer’s agreement to consent to, or not to oppose, expungement of customer dispute information.  Such an agreement violates FINRA Rule 2081.  The rule also applies if the customer is the party making the offer to consent to, or not to oppose, expungement in exchange for a customer release.

 

For more information, please review Regulatory Notice 14-31.