The Financial Industry Regulatory Authority has disclosed it is working on a rule to bar the deletion of an investor’s complaint against a broker in the public records as a condition for a settlement between a complaining investor and a broker.
A letter from Finra Chairman and CEO Richard Ketchum, which made that statement and included a commitment to work with state securities regulators and other stakeholders to review the complaint expungement process, was released by Senators Charles Grassley (R-IA) and Jack Reed (D-RI) on Friday.
Grassley and Reed sounded the alarm in mid-December that too many complaints were being made secret too quickly in the wake of a Public Investors Arbitration Bar Association study that showed Finra arbitrators deleted 96.9 percent of investor complaints against brokers in cases where brokers sought the deletions from the agency’s Broker Check System from May 2009 through December 2011.
“It appears (Finra) is taking the problem seriously,” Grassley and Reed said in a press release.
Ketchum noted that while the percentage of public complaint removals sought by brokers was high, the number was actually small: 850 complaints deleted out of 17,635 arbitration grievances filed by investors during that period.
However, “any inappropriate reduction in the amount of broker disclosure to investors is of serious concern to Finra,” Ketchum said
He added it is appropriate to delete an investor complaint if an arbitrator finds the information is false or “otherwise has no meaningful investor protection or regulatory value”