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3 ways to clear a client complaint from a FINRA record

Q: Although I wasn’t named as a defendant in a recent arbitration, I was apparently the subject of the client’s arbitration claim. I think I may have spoken to this client on two occasions over the years and was certainly not involved in the transaction he’s complaining about. Since I’m not a party to the arbitration, how can I get this removed from my CRD?

A: As someone who was the subject of an investment-related customer-initiated arbitration that alleged that he or she was involved in one or more sales practice violations, but who was not named as a respondent in the arbitration, you have three arbitration avenues to pursue expungement under the FINRA code:

  1. A party to the arbitration (for example, your broker-dealer employer) may request the expungement on your behalf during the underlying customer case;

  2. You can try to intervene in the underlying customer case; or

  3. You can file a separate arbitration case seeking expungement after the underlying customer case closes.

Regardless of which avenue you decide to pursue, the first step is to get your own lawyer. Expungement is considered an extraordinary remedy by FINRA (as well as state and federal regulators) and is only granted under very limited circumstances. The expungement relief in most cases must be based on affirmative judicial or arbitral findings that:

A. The claim, allegation or information was factually impossible or clearly erroneous’;

B. The registered person was not involved in the alleged investment-related sales practice violation, forgery, theft, misappropriation or conversion of funds; or

C. The claim, allegation or information is false.

In certain cases you may also need to obtain a determination from the arbitrators or court to the effect that the expungement “would have no material adverse effect on investor protection, the integrity of the CRD system or regulatory requirements.”

Bear in mind that even if you get an order of expungement from an arbitration panel, you must also obtain an order from a court confirming the arbitration award that contains the expungement ruling.

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