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BrokerCheck Expungement

Securities Lawyer Jonathan Kurta
By: Jonathan Kurta Author

BrokerCheck expungement allows brokers to have allegations of misconduct and customer disputes removed from their public records. The Financial Industry Regulatory Authority (FINRA) maintains the BrokerCheck database. This database allows customers to easily access broker information, including records of customer disputes that allege violations of securities laws. Common examples of investment fraud allegations include excessive trading, unsuitable recommendations, and misrepresentation or omission of crucial facts. The expungement process means that these records may be incomplete, and investors cannot see if a broker has filed expungement requests.

Expungement is one of many reasons that the securities industry remains stacked in favor of powerful brokerage firms and unscrupulous brokers.

FINRA Expungement Requirements

According to FINRA rules, the broker should only be able to remove disputes from their records under extremely limited circumstances, describing expungement as an “extraordinary remedy.”

FINRA Rule 12805 outlines the three circumstances under which a broker may have their dispute expunged from their record:

  1. The claim is factually impossible or clearly erroneous.
  2. The registered person was not involved in the alleged investment-related sales practice violation, forgery, theft, misappropriation, or conversion of funds.
  3. The allegation is false.

How Do Broker CRD Complaints Appear on BrokerCheck?

In order to file a complaint, an investor must first file a Statement of Claim through FINRA Dispute Resolution. The statement of claim details the alleged broker misconduct as well as the amount the broker seeks to recover.

  • Once a broker files a complaint, firms can deny disputes without any external review. Many disputes end with a denial, although investors can still pursue FINRA arbitration following a denial. Just because a firm denies the dispute does not mean there is no merit to the complaint.
  • Firms may also choose to settle with the client.
  • If the firm does not settle, the investor may choose to pursue FINRA arbitration in order to recover their losses and secure a settlement.

What is FINRA Arbitration?

The Financial Industry Regulatory Authority provides a platform for dispute resolution called FINRA arbitration. Instead of suing a broker or brokerage firm in civil court, investors are typically required by their investing contracts to file a dispute with FINRA and have their case heard by a panel of one or three arbitrators.

  • Arbitrators are supposed to be neutral, but securities attorneys have called this neutrality into question. Many arbitrators have careers in finance, which could create a pro-industry bias that favors brokerage firms.
  • FINRA arbitration proceedings are non-public, another aspect of arbitration that may favor brokerage firms.
  • Arbitration panel decisions are final and binding. It is extremely rare for a civil court to overturn a FINRA arbitration panel’s decision. Despite the finality of FINRA arbitration panel decisions, until recently, expungement allowed brokers to easily hide from the consequences of an arbitration award or a regulatory action.

FINRA BrokerCheck Expungement

Before October 2023, brokers reportedly had a high success rate when it came to getting their BrokerCheck records expunged. A 2020 study from Stanford Law School and Harvard University found that over 80% of brokers who sought expungement had their requests granted. The study also found that brokers with expunged records were more than three times as likely to re-offend.

PIABA found that brokerage firms rarely opposed broker expungement requests, which allowed them to work together to make FINRA arbitration work in their favor. “For example,” PIABA reported, “brokers and brokerage firms were able to coordinate in the selection of arbitrators who were more likely to grant expungement requests.” To oppose the expungement, clients had to appear for arbitration and pay for the associated costs themselves. Unsurprisingly, affected clients opposed expungement in only 10% of cases in the most recent PIABA study.

FINRA Expungement Rule Change

Following the Stanford study, FINRA determined that it would add restrictions for brokers seeking expungement. In October 2023, FINRA adopted regulations meant to make it more difficult for brokers to remove investor disputes from their records. According to an article in Financial Planning, there was a rush for brokers to enter their BrokerCheck expungement forms before the October 16 rule change.

Three-Person Arbitration Panels: Brokers have expungement hearings with three-person FINRA arbitration panels. Previously, hearings only required one arbitrator. The three-person panel must unanimously agree to the FINRA expungement for it to move forward.

Increased Costs. The three-person arbitration panel requirement increases the total cost of the expungement process, which PIABA estimates now sets brokers back over $10,000.

Notifications of Expungement Requests. Customers and state regulators must receive notification of the expungement request. To complete the expungement, regulators or customers that filed the original disputes must receive notification of the attempted expungement, so they have the chance to object.

Time Limits. The new rules require brokers to file an expungement request within three years of receiving a customer complaint, or two years following an arbitration award.

Brokerage Firm Requirements. Previously, brokers did not have to inform the brokerage firm they worked with at the time of the dispute of their intent to have their record expunged. They could instead only inform their current brokerage firm, whose supervisors might not have as much familiarity with the dispute.

Limits on Forum Shopping. Before the new rules, brokers had input on which arbitrators would determine the outcome of their expungement request. Following the implementation of the new guidelines, brokers can no longer strike potential arbitrators from the list. Instead, the unanimous approval of expungement must come from three randomly selected arbitrators.

Effects of the Nw BrokerCheck Expungement Rules

Since the reforms to the expungement process, the Public Investors Advocate Bar Association (PIABA) has noted a dramatic decrease in the number of requests for expungement.

Unfortunately, expungement-seekers may have another loophole to exploit. Brokers do not have to use FINRA arbitrators to receive an expungement order. Instead, they can seek expungement via the American Arbitration Association and another arbitration organization called Judicial Arbitration and Mediation Services (JAMS).

Some law firms specialize in helping brokers get their records expunged. These attorneys urge potential clients to act as quickly as possible to avoid damage to their reputations.

Why Should I Hire a FINRA Arbitration Attorney?

Investors are not required to have attorneys for FINRA arbitration attorneys, but having expert legal counsel may help investors avoid some of the pitfalls of arbitration. For instance, FINRA attorneys can help with the arbitrator selection process. The securities industry is relatively small, and experienced securities attorneys are more likely to be familiar with the potential pool of arbitrators.

If you have worked with a broker who you believe may have violated FINRA rules, you may have a case for a securities attorney. Contact our attorneys for a free case evaluation: (877) 600-0098 or

Securities Lawyer Jonathan Kurta
Written by: Jonathan Kurta

Jonathan Kurta is an accomplished securities attorney and a founding partner at Kurta Law.