Financial Advisors: Here’s How to Expunge Customer Dispute Information

When a customer lodges an official complaint against a financial advisor, this information, known as customer dispute information, is logged in the Financial Industry Regulatory Authority’s (FINRA) Central Registration Depository (CRD) record. These types of complaints can severely harm a financial advisor’s reputation, even when they are filed without merit.  Luckily, however, a process exists by which a financial advisor can have customer dispute information expunged from his or her record. Below is an overview of the expungement process.

Rule 2080

Rule 2080 regulates customer dispute information, and it applies solely to disputes between customers and firms or associated financial professionals. The requirements of the rule do not, however, apply to disputes between firms and associated persons. Rule 2080 requires that a court of competent jurisdiction confirm or order arbitration awards directing expungement before FINRA will expunge such information.

The Expungement Process

A financial professional who seeks expungement in an arbitration proceeding should explicitly request expungement in his or her answer, statement of claim, or counterclaim. After a request for expungement is made, the assigned FINRA arbitrators decide whether to grant such a request on the basis of standards detailed in Rule 2080. In addition to the requirements of Rule 2080, FINRA’s Arbitration Code contains specific procedural requirements relating to requests by firms and financial professionals for the expungement of customer dispute information, including the following:

• Arbitration hearings must be in-person or telephonic.

• Arbitration hearings must be recorded.

• Arbitrators must review and consider settlement documentation prior to reaching a decision on whether to expunge customer dispute information.

If expungement relief is granted, the Arbitration Code also requires that the FINRA arbitrators assigned to the case briefly explain the factual basis for their decision. This explanation must include the specific Rule 2080 standard met to justify expungement of customer dispute information.  

Fort Lauderdale Financial Advisor Representation

If you are a financial advisor and need experienced legal representation, contact Simms Law, P.A. immediately. We are well-credentialed and have earned a reputation in the industry for honesty, integrity, and aggressiveness. One of our primary areas of practice is financial advisor representation, which is a very specialized and complicated field. Financial advisors, who are savvy in their own fields of expertise, are often treated unfairly and find themselves in need of experienced legal representation to protect their reputations and their livelihoods. During such times, Simms Law P.A. is always available to provide knowledgeable and skilled legal counsel to our financial advisor clients. Our representation of financial advisors covers a wide range of issues, including: the expungement of disclosures through FINRA expungement proceedings, compensation issues, raiding-related claims, and matters pertaining to the successful transition from one firm to another. Please contact us by phone or through one of the contact forms on our website to schedule a free consultation.