Lawyers Enlist State Regulators in Fight to Stop Brokers From Erasing Complaints

The new FINRA rules, which went into effect Oct. 16, require that expungement requests be decided by a panel of three people who have received expungement training. Previously, only a single arbitrator could make the decision to remove customer complaints from a broker’s record. 

The new rules also include a time limit on when brokers can request expungement and require state securities regulators to be notified of all expungement requests earlier in the process. 

While the rules give more state regulators more time to participate, the time windows and deadlines can still be short, said Joseph Borg, the former director of the Alabama Securities Commission. The new arbitration expungement training program will help state regulators, who have traditionally not participated in FINRA arbitration, to understand the new rules and procedures, he said. 

“Regulators have limited resources and limited time, so we expect to have much discussion, collaboration and coordination with our fellow state regulators as we learn the ropes of the new FINRA rules,” Borg said. “All of this is in furtherance of our core mission to inform and protect investors nationwide.” 

Regulators from numerous states are already planning to join the training program in Alabama in November, Borg added. 

Broker records are used by state securities regulators for licensing and monitoring of broker activity, and retail investors are encouraged to “do their homework” before investing their money, Borg said, adding that investors should be able to trust that information available on a broker is an accurate reflection of their history. 

“From the investor’s point of view, a historical point of view and the regulator’s point of view, this information is very, very important,” he said.