The agency took a sample of its reps between January 2016 and December 2021, when there were 920,000 reps registered with Finra at some point during the period. During this time frame, 7,400 professionals sought expungement of their records (representing 0.8% of the total). The 7,400 figure was almost 10% of the 75,000 reps that had at least one customer dispute disclosure on their CRD record.
Under the special roster proposal, approximately 90% of the expungement requests would have been considered by a three-person panel, randomly selected from the special arbitrator roster. The remaining expungement requests would have been considered by a panel from the customer-initiated arbitration that heard the full merits of a customer’s arbitration claim, Finra said.
Developing “alternative enhancements to the existing process, or redesigning that process altogether, will take substantially more time than approving the special roster proposal,” Finra said. The agency added, “Failure to adopt the special roster proposal in the meantime may result in expungements continuing to occur in the manner and frequency described above.”
The agency plans “to organize further discussions with other securities regulators, broker-dealer firms and other interested parties to consider the questions raised in this paper,” the regulator said.