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FINRA Customer Complaint Expungement Process to Become Tougher

Simms Law, P.C. June 14, 2022

When a customer is dissatisfied with the work of his or her financial advisor, he or she may lodge a complaint with the Financial Industry Regulatory Authority. Unfortunately, however, customers sometimes lodge complaints that are unwarranted or even fraudulent. When a financial advisor or other securities professional is harmed by such behavior, he or she has the option of requesting expungement of the complaint from his or her record. In the past, expungement requests had an extremely high rate of approval. Proposed FINRA rules, however, aim to make this process much tougher for securities professionals than it’s been in the past.

What’s The Purpose Of FINRA’s New Rules?

As noted above, it’s been relatively easy to expunge customer complaint information in the past. In fact, a 2013 study demonstrated that financial advisor expungement requests were successful nearly 97% of the time. This high success rate caused concern among advocacy groups, and they requested that FINRA make changes to the expungement process. FINRA responded to these concerns by issuing informal guidance to arbitrators that was intended to make the process more stringent. A follow-up study, however, showed only a slight decrease in the expungement success rate.

What Changes Does FINRA Aim To Make?

In response to the studies discussed above and additional public input, FINRA recently announced plans to promulgate new expungement rules. The first of the changes proposed in these rules is the codification of FINRA’s previous expungement guidance. However, this change will have little practical effect, as FINRA’s informal guidance is currently treated as mandatory by FINRA members. Additional changes include the establishment of a one-year expungement request time limit and an overall heightening of the standards that financial advisors must meet before expungement may be granted. If adopted, these changes will make it much more difficult for financial advisors to expunge customer complaint information from their FINRA records. If you are a financial advisor and have questions about how these proposed changes may affect you, please contact one of our experienced attorneys today for a consultation.

Fort Lauderdale Financial Advisor Representation

If you’re a financial advisor and wish to expunge customer complaint information from your record, Simms Law, P.A., will fight for your rights. At Simms Law, P.A., we have a reputation in the industry for honesty, integrity, and aggressiveness, and one of our primary areas of practice is the representation of financial advisors who’ve been treated unfairly by their 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. If you are a financial advisor and need legal representation in Fort Lauderdale or elsewhere in Florida, please contact us by phone or through one of the contact forms on our website to schedule a free consultation.