Expungement is a process that is available under the FINRA rules in certain circumstances through which a financial advisor, broker or other securities professional may request the “expungement,” or removal, of information reflected on the professional’s record.  Expungement in pursued primarily to protect the securities professional’s reputation, as the negative information at issue is usually available to the investing public through FINRA’s CRD/BrokerCheck system.  As every securities professional knows, derogatory information appearing on the BrokerCheck system can severely damage a professional’s career.

We are experienced in representing securities professionals in expungement proceedings.  These claims generally arise from steps that may be taken under FINRA rules, in certain circumstances, to expunge negative information from a Form U4 or U5.  Many of these cases relate to the requested expungement of negative customer dispute information, i.e., disclosures that appear on a Form U4 or U5 related to a customer complaint and that are available to the public through the CRD/BrokerCheck system.  These claims are governed by FINRA Rules 2080, 12805 and 13805, which provide for the potential expungement of customer dispute information in narrow circumstances – when a FINRA arbitrator or arbitration panel finds that 1) the customer’s claim, allegation or information Is factually impossible or clearly erroneous, 2) the advisor was not involved in the alleged misconduct, or 3) the claim, allegation or information is false.  For FINRA’s summary of the process for expungement of customer dispute information, see here.

Although must expungement claims request the removal of negative customer dispute information, some expungement proceedings request the removal of other negative information (not related to a customer dispute).  These cases usually relate to negative statements on Form U5s and the firm’s characterization of the reasons for the advisor’s termination.  Those reasons may be false and defamatory, and therefore subject to challenge in a FINRA expungement proceeding.  These claims may be limited to a request for expungement, or in appropriate circumstances they may be combined with requests that the arbitration panel award significant damages in favor of the securities professional for defamation.