Brokers' Record Cleansing Reaches 87% Success Rate Despite FINRA Efforts
In a report released today, the Public Investors Arbitration Bar Association stated that despite reforms by FINRA, brokers still have a high success rate when seeking expungement. Based on a recent study analyzing arbitration cases from January 1, 2012 to December, 31, 2014, of the 460 cases that resulted in settlements or stipulated awards, 87.8% were granted expungement when it was sought.
The study was an extension of the previous review conducted two years ago in which the Public Investors Arbitration Bar Association surveyed cases settled between January 1, 2007 and May 18, 2009. In the former study, it was noted that out of every 10 settled cases, nine were granted expungement. It was after this study that FINRA launched an initiative for increased training and guidance for arbitrators on situations related to the expungement process and approved a rule prohibiting expungement-conditioned arbitration settlements.
FINRA has taken steps in recent years in hopes of improving the process in which expungement is determined. This has involved emphasis regarding expungement as an “extraordinary remedy.” If a broker is granted expungement, it may send false impression of the broker to investors as the broker is cleared of any alleged wrongdoing. This means investors may be unable to get the full amount of information necessary regarding the integrity of the broker with whom they work.
Another step proposed by the lawyers’ group to improve the process was to include the additional review of broker requests by a FINRA attorney. Other proposed steps include notification to state regulators of the expungement requests and increase arbitrator training.
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