As we previously reported, on April 12, 2023, the U.S. Securities and Exchange Commission ("SEC") approved the Financial Industry Regulatory Authority's ("FINRA") revised proposal to establish more difficult procedures for expungement of customer complaints from an Associated Person's records maintained by the Central Registration Depository ("CRD") in arbitrations before FINRA Dispute Resolution.
On August 11, 2023, FINRA adopted the amendments and issued its Regulatory Notice 23-12, noting the amendments become effective October 16, 2023. The amendments impose requirements on expungement requests (a) filed by an Associated Person during an investment-related, customer-initiated arbitration (customer arbitration), or (b) filed by a party to the customer arbitration on behalf of an Associated Person (on-behalf-of request), or (c) filed by an Associated Person separate from a customer arbitration (straight-in request). The amendments to Rules 12800 and 12805 apply to customer arbitrations and on-behalf-of requests, and the amendments to Rules 13805 and 13806 apply to straight-in requests.
Additionally, FINRA codified and updated the best practices in its Notice to Arbitrators and Parties on Expanded Expungement Guidance (Guidance) applicable to all expungement requests, which include establishing additional requirements for expungement hearings, facilitating customer attendance and participation in all aspects of the expungement hearings process, and codifying the arbitration panel's ability to request any evidence relevant to the expungement request.
The changes detailed in our prior post will greatly impact the expungement process. Should you have any questions regarding the expungement process or how the rules may affect you, please contact any member of our Securities Litigation team.
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