WASHINGTON, DC – In an effort to protect investors and the integrity of the Financial Industry Regulatory Authority’s (FINRA) BrokerCheck program, U.S. Senators Jack Reed (D-RI) and Chuck Grassley (R-IA) today sent a bipartisan letter asking FINRA to clarify and strengthen standards for expungement of investor complaints against brokers.
Citing a recent Public Investors Arbitration Bar Association (PIABA) study, which found that FINRA arbitrators granted expungement relief in 96.9% of cases from May 2009 through December 2011, the U.S. Senators said they are concerned about the number of times investor complaints may be expunged, or removed, from publicly available broker records maintained by FINRA via BrokerCheck.
The Senators wrote: “We share FINRA’s view that ‘expungement is an extraordinary remedy that should be granted only under appropriate circumstances,’ and that it should be permitted ‘only when it has no meaningful investor protection or regulatory value.’ However, we believe that meaningful investor protection includes the disclosure of whether a customer dispute was settled. Not just for transparency sake, but also to help prospective investors make informed decisions about which individuals or firms with whom to do business.”
In an effort to determine if the high percentage of expungements are warranted, the Senators asked FINRA to publicly detail the number of instances in which FINRA has questioned or challenged the provision of expungement relief and provide a detailed description of the circumstances of each case. The Senators also asked FINRA to respond to the recommended changes cited in the PIABA study and explain whether FINRA intends to adopt each recommendation.
Full text of the letter follows (PDF attached here)