What is FINRA arbitration?

FINRA arbitration is a method of resolving disputes between investors and brokerage firms or financial advisors outside the court system. It involves a neutral third party, an arbitrator, who reviews the case and makes a binding decision.

Why choose arbitration over litigation?

Arbitration is typically faster, less formal, and more cost-effective than litigation. It also provides a final resolution to disputes, with limited grounds for appeal. Most relationships with financial advisors are formalized by entering into a contract which contains a dispute resolution clause. Nationally, most dispute resolution clauses provide for FINRA arbitration.

Who can file a FINRA arbitration claim?

Investors, brokerage firms, and financial advisors can file a FINRA arbitration claim if they have a dispute related to securities or investment activities. FINRA arbitration is normally the forum for disputes among registered persons, brokerage firms and the public customer clients of the firms.

How do I start the FINRA arbitration process?

To start the arbitration process, Bakhtiari & Harrison will file a Statement of Claim with FINRA, detailing the nature of the dispute, the parties involved, and the relief sought.

What is a Statement of Claim?

A Statement of Claim is a written document submitted by the claimant outlining the facts of the dispute, legal claims, and the desired outcome.

What happens after filing the Statement of Claim?

After filing, the respondent has 45 days to answer the Statement of Claim. The answer must address the claims and may include counterclaims or other relief sought.

What fees are involved in FINRA arbitration?

Fees include filing fees, hearing session fees, and possibly member surcharges or process fees, depending on the specifics of the case.

Can I represent myself in FINRA arbitration?

Yes, you can represent yourself, but many choose to hire an attorney with experience in securities arbitration due to the complexity of the process. Investors and industry professionals who choose to represent themselves do so at a substantial disadvantage, Wall Street firms typically retain experienced professional counsel to represent their interests.

How are arbitrators selected?

Arbitrators are selected through the Neutral List Selection System (NLSS), which provides a list of potential arbitrators. Both parties rank and strike names to agree on a panel.

What qualifications do FINRA arbitrators have?

FINRA arbitrators include attorneys, accountants, financial professionals, and public members who have undergone training and meet FINRA’s qualification standards.

How long does the arbitration process take?

The process typically takes 12-18 months from filing to the final award, but this can vary based on case complexity and scheduling. Preference may be given to investors that are seriously ill or elderly.

What is a prehearing conference?

A prehearing conference is a meeting between the parties and the arbitrators to discuss procedural issues, set a schedule, and address preliminary matters including final FINRA arbitration hearing dates.

What is discovery in arbitration?

Discovery is the exchange of documents and information between the parties to prepare for the hearing. It is more limited than in litigation.

What happens during the arbitration hearing?

During the hearing, both sides present evidence, call witnesses, and make arguments. The arbitrators then deliberate and render a decision.

Is the arbitration hearing open to the public?

No, arbitration hearings are private and confidential. Only the parties, their representatives, and the arbitrators may attend.

Can I settle my case before the hearing?

Yes, parties can settle at any time before the arbitrators render a decision, often through negotiation or mediation.

What is mediation in the context of FINRA arbitration?

Mediation is a voluntary process where a neutral mediator helps the parties negotiate a settlement. It is separate from arbitration and non-binding.

What happens if I lose in arbitration?

If you lose, the arbitrator’s decision is final and binding. There are limited grounds for challenging the award in court.

Can I appeal an arbitration decision?

Generally, you cannot appeal an arbitration decision. However, you can seek to vacate the award on very narrow grounds, such as arbitrator misconduct.

What types of disputes are resolved through FINRA arbitration?

Disputes include claims of fraud, breach of fiduciary duty, negligence, breach of contract, and other issues related to securities and investments.

How are damages determined in arbitration?

Damages are determined based on the evidence presented, including financial records, expert testimony, and the specifics of the case.

Can arbitrators award attorney’s fees?

Arbitrators can award attorney’s fees if provided for by law, contract, or if both parties request it.

How do I enforce an arbitration award?

An arbitration award can be enforced in court through a confirmation process, making it a judgment that can be collected.

What is expungement in FINRA arbitration?

Expungement is the process of removing information from a broker’s record on the Central Registration Depository (CRD) system. It is only granted under specific conditions.

What are the grounds for vacating an arbitration award?

Grounds for vacating an award include arbitrator bias, fraud, corruption, or misconduct, as well as exceeding their powers.

Are arbitration awards public?

Yes, arbitration awards are published on FINRA’s website, providing transparency and access to past decisions.

What is the role of the Office of Dispute Resolution?

The Office of Dispute Resolution administers arbitration and mediation cases, ensuring that the process runs smoothly and efficiently.

What is a Simplified Arbitration?

Simplified Arbitration is for cases involving claims of $50,000 or less, allowing for a quicker and less expensive resolution without a hearing.

Can I request an expedited hearing?

Yes, in certain circumstances, such as elderly or seriously ill parties, you can request an expedited hearing.

What is the role of an arbitrator?

An arbitrator acts as a neutral decision-maker, reviewing evidence, hearing testimony, and issuing a binding decision on the dispute.

How do I prepare for an arbitration hearing?

Preparation involves gathering evidence, preparing witnesses, and developing a clear case strategy to present to the arbitrators.

What types of evidence are admissible in arbitration?

Evidence can include documents, emails, financial records, expert reports, and witness testimony, subject to the arbitrators’ discretion.

Can I request documents from the other party?

Yes, through the discovery process, you can request relevant documents and information from the other party to support your case.

How does FINRA handle conflicts of interest with arbitrators?

FINRA requires arbitrators to disclose any potential conflicts of interest, and parties can object to arbitrators they believe are biased.

What happens if a party does not comply with discovery?

If a party does not comply, the other party can file a motion to compel, asking the arbitrators to order compliance and possibly impose sanctions.

What is a motion in arbitration?

A motion is a formal request for the arbitrators to make a ruling on a specific issue, such as compelling discovery or dismissing a claim.

Can I request interim relief in arbitration?

Yes, you can request interim relief, such as temporary restraining orders or injunctions, to preserve the status quo pending the final decision.

How are hearing locations determined?

Hearing locations are typically determined by the location of the claimant unless both parties agree to a different venue.

What is a telephonic or virtual hearing?

Telephonic or virtual hearings are conducted via phone or video conference, allowing parties to participate remotely.

How are arbitration awards paid?

Awards are typically paid by the losing party within 30 days of the decision, unless otherwise specified by the arbitrators.

What if the losing party does not pay the award?

If the losing party does not pay, you can seek enforcement through the courts, turning the award into a legally enforceable judgment.

Are there any limits on the types of claims I can bring in arbitration?

FINRA arbitration covers a broad range of claims related to securities, but there are some statutory and regulatory limits on certain types of claims.

Can I bring a class action in FINRA arbitration?

No, class actions are not permitted in FINRA arbitration. However, you can join other claimants in a single arbitration if the claims are similar.

What is the role of expert witnesses in arbitration?

Expert witnesses can provide specialized knowledge and opinions to help explain complex financial issues to the arbitrators.

How are hearing dates scheduled?

Hearing dates are scheduled based on availability of the parties and arbitrators, with consideration for the complexity of the case.

Can I request a different arbitrator if I believe one is biased?

Yes, you can challenge an arbitrator if you believe they have a conflict of interest or bias that affects their impartiality.

What is a “chairperson” in a FINRA arbitration panel?

The chairperson is the lead arbitrator who manages the procedural aspects of the case and ensures the hearing runs smoothly.

How does FINRA ensure fairness in arbitration?

FINRA has rules and procedures in place to ensure a fair and impartial process, including arbitrator training and disclosure requirements.

How do I learn more about the FINRA arbitration process?

For more information, you can visit FINRA’s website, contact their Office of Dispute Resolution, or consult with experienced attorneys like those at Bakhtiari & Harrison.

How can Bakhtiari & Harrison help with FINRA arbitration?

Bakhtiari & Harrison can assist with filing claims, responding, selecting arbitrators, discovery, hearings, and ensuring the best possible outcome through skilled representation and strategic advice.

Reclaiming Your Career: 3 Critical Reasons Why Equity is Key in FINRA Expungement

A Bakhtiari & Harrison Guide for Stockbrokers with FINRA Disclosures

Your Professional Reputation is Under Siege: The Silent Threat of FINRA Disclosures

For stockbrokers, your Central Registration Depository (CRD) record and the public-facing BrokerCheck are not just administrative formalities; they are the very bedrock of your professional identity. In an industry built on trust and integrity, a single negative mark – a customer complaint, an internal investigation, or even a termination noted on a U5 form – can cast a long and devastating shadow over your entire career. You, the dedicated financial professional, the one committed to serving clients and building a successful practice, suddenly find yourself facing an existential threat.

Imagine this: You’ve dedicated years to mastering the complexities of the financial markets, cultivating client relationships, and adhering to the highest ethical standards. Then, a singular, often unfair or misleading event leads to a disclosure on your CRD. Suddenly, doors that were once open begin to close. Prospective employers hesitate, clients question your credibility, and the path to advancement seems to vanish. This isn’t just a minor setback; for many, it’s a de facto industry ban, a professional death sentence where the “punishment outweighs the crime” by a monumental margin. You are the hero of your own story, but right now, you’re facing a formidable villain: an unexpunged disclosure that threatens to steal your future.

At Bakhtiari & Harrison, we understand this profound struggle because we’ve stood shoulder-to-shoulder with countless stockbrokers just like you. We recognize the immense pressure, the frustration, and the sense of injustice that comes with an unwarranted mark on your professional record. We know that behind every CRD disclosure is a person whose livelihood and reputation are on the line.

Navigating the Labyrinth: Understanding the FINRA Expungement Process

The Battle for a Clean Record: What is FINRA Expungement?

FINRA expungement is the legal process by which a stockbroker seeks to remove false, erroneous, or misleading information from their CRD and BrokerCheck records. It’s not a simple erasure; it’s a rigorous legal proceeding, primarily conducted through FINRA arbitration, designed to ensure the integrity of the public record while also providing a vital pathway for deserving individuals to clear their names.

The FINRA expungement process operates under specific rules, primarily FINRA Rules 12805 and 13805 of the Codes of Arbitration Procedure. These rules outline the criteria for expungement and the procedural steps involved. Generally, for customer-related disclosures, the associated person must demonstrate one of three grounds to the arbitration panel:

The claim, allegation, or information is factually impossible or clearly erroneous. This often applies to situations where a customer’s complaint is based on demonstrably false information, a misunderstanding, or a clerical error.
The associated person was not involved in the alleged investment-related sales practice violation, forgery, theft, misappropriation, or conversion of funds. This is for cases where the broker was named in a complaint but had no involvement in the alleged misconduct.
The claim, allegation, or information is false. This broadly covers situations where the information reported is simply untrue.

For industry-related cases, such as those arising from an internal firm investigation or a U5 termination where FINRA Rule 2080’s specific criteria for customer dispute information do not directly apply, the process still demands a robust presentation to an arbitration panel. While the specific “grounds” may differ, the fundamental goal remains the same: to demonstrate that the information is inaccurate, defamatory in nature, misleading, or unfairly paints a negative picture of the broker’s conduct.

Recent Rule Changes and Their Impact

It’s important to acknowledge that FINRA’s expungement customer-related rules have undergone significant changes, particularly those effective October 16, 2023. These reforms were implemented to address concerns about the historical success rates of expungement requests and to further ensure the integrity of the process. Key changes include:

Three-Arbitrator Panels for “Straight-In” Requests: Expungement requests filed separately from a customer arbitration (often against a former firm, known as “straight-in” requests under Rule 13805) now require a three-person panel randomly selected from a special roster of experienced public arbitrators with enhanced expungement training. This replaces the previous option of a sole arbitrator.
No Striking or Stipulation of Arbitrators: Parties are generally prohibited from striking selected arbitrators or stipulating to other arbitrators for these panels.
Time Limits on Filing: New rules impose tighter time limits on when expungement requests can be filed, typically within two years of the close of a customer arbitration or civil litigation, or within three years after the initial reporting of a customer complaint if it doesn’t evolve into an arbitration or litigation.
Customer Participation: In customer-related cases, customers are now provided more opportunities to participate in the expungement hearing, including attending, testifying, and presenting their position.

These changes underscore the increased scrutiny and complexity of the expungement process. It is no longer a simple undertaking; it demands a sophisticated understanding of the rules, meticulous preparation, and compelling advocacy.

Beyond the Letter of the Law: The Indispensable Role of Equity in Arbitration

When Rules Fall Short: The Call for Fairness and Justice

While FINRA Rule 2080 and its related procedural rules provide the framework for expungement, they cannot possibly account for every nuance, every unique circumstance, or every instance of profound unfairness that a stockbroker might face. This is where the ancient and enduring principle of equity enters the picture, serving as a vital counterpoint to rigid legal formalism.

For hundreds of years, legal systems around the world have recognized that “the law,” while necessary for order, can sometimes be an imperfect instrument, leading to harsh or unjust outcomes when applied without consideration for individual circumstances. This recognition gave rise to “equity jurisprudence” – a body of law that seeks to provide fair remedies where strict adherence to common law rules would lead to an unconscionable result.

Courts Affirming Equity: FINRA Rule 2080 as Procedural, Not Substantive

Crucially, courts in the United States have ruled that FINRA Rule 2080 is procedural in nature, not substantive. This distinction is paramount. It means that while the rule outlines how expungement requests are to be handled, it does not, and cannot, limit the inherent power of a court (or, by extension, an arbitration panel acting as a quasi-judicial body) to apply broader principles of equity and fairness.

Consider the landmark ruling in Lickiss v. FINRA. In this case, the court noted that “Rule 2080 does not provide any substantive standard for determining whether expungement is appropriate or required.” The court further clarified, “There is nothing in the Act, rules, or regulations that provide substantive criteria as to when expungement is appropriate… While FINRA rule 2080 addresses expungement, it only sets forth procedures, not a substantive duty.” This judicial perspective is critical, as it opens the door for arbitrators to look beyond the narrow confines of Rule 2080’s enumerated grounds and consider the broader equities of a stockbroker’s situation.

The Arbitrator’s Mandate: Applying “What Is Right”

Arbitration, by its very nature, is designed to be a more flexible and often more equitable forum than traditional litigation. Arbitrators are frequently granted broad discretion to assess the totality of the circumstances and arrive at a just resolution. This is not to say that arbitrators disregard the rules, but rather that they possess the latitude to interpret and apply them in a manner that promotes fairness.

In the context of FINRA expungement, this equitable power becomes profoundly important. Imagine a stockbroker who, through no fault of their own, is caught in the crossfire of a firm’s internal dispute, or whose termination is recorded on a U5 form in a way that, while technically accurate in its wording, is profoundly misleading about the broker’s true conduct. Or perhaps, as we illustrated earlier, a broker is terminated for a non-investment related matter – a personal conflict, a minor administrative oversight – but the ensuing U5 disclosure, particularly if it hints at underlying misconduct, renders them unemployable.

In such scenarios, a strict, hyper-literal application of FINRA expungement criteria might lead to a denial, even if the result is demonstrably unjust. This is precisely where arbitrators have a moral and legal obligation to consider equity. They must ask:

Does the disclosure on the CRD/BrokerCheck truly reflect the underlying facts and the broker’s professional integrity?
Does the “punishment” of a permanent public mark, which can effectively ban a broker from their chosen profession, genuinely align with the nature and severity of the alleged “offense”?
Is there a clear and compelling argument that removing this disclosure would promote justice and fairness without undermining investor protection?

An arbitrator’s paramount responsibility is to reach an equitable result. This means they are free to apply their own sense of law and equity to the facts, making an award that reflects the spirit rather than merely the letter of the rules, even if it appears to exceed the precise language of the expungement criteria. This is not a radical notion; it is deeply embedded in the very fabric of dispute resolution, especially in arbitration.

The Human Cost: Real-World Scenarios Demanding Equity

While much of the discussion around FINRA expungement centers on customer complaints, an equally, if not more, devastating scenario arises from industry-related disclosures. These often stem from internal investigations, “for cause” terminations, or situations where a firm’s U5 filing, while legally compliant, paints an unduly negative and career-crippling picture of an associated person.

Consider these common, yet profoundly unfair, situations:

The “De Facto Ban” Scenario: A stockbroker is terminated for a non-investment related matter – perhaps a personality clash with a manager, a disagreement over firm policy, or even something as innocuous as not meeting a subjective sales target. The firm, in its U5 filing, includes language that, while not explicitly accusing misconduct, is vague enough to raise red flags for any future employer. For instance, a U5 might state “terminated for failure to follow firm policy relating to opening accounts” without providing context, allowing new firms to assume something far more egregious than what actually occurred. In a highly regulated industry where perceived risk is shunned, this ambiguous disclosure effectively acts as a “de facto ban,” rendering the broker unemployable. FINRA Rule 2080, strictly interpreted, might struggle to fit this into the “factually impossible or clearly erroneous” criteria, even though the overall outcome is manifestly unjust. Here, the arbitrator’s application of equity – recognizing the disproportionate impact of the disclosure versus the actual transgression – is absolutely vital.
The “Collateral Damage” Incident: A compliance issue arises at a firm, and a broker, though tangentially involved or simply in a supervisory chain, is named in an internal investigation or receives a disclosure, even if they were not directly responsible for the underlying issue. The firm, seeking to demonstrate due diligence, may err on the side of over-reporting, leaving an innocent broker with a permanent mark. Applying equity, an arbitrator can assess the true degree of involvement and the fairness of holding the broker solely responsible for a systemic or firm-level issue.
The “Unjustified Allegation” by a Former Employer: In competitive environments, sometimes a former employer, perhaps out of malice or simple negligence, files a U5 that contains inflated or baseless allegations. While “false” is a ground under Rule 2080, proving outright falsity can be a high bar. Equity allows an arbitrator to weigh the credibility of the allegations against the broker’s otherwise clean record and overall contributions, assessing whether the disclosure is truly “right” to remain on the public record.

In these industry-related cases, the stockbroker is often caught in a bureaucratic snare, facing consequences that bear little resemblance to the actual facts or the severity of their actions. The explicit standards of FINRA Rule 2080 might not perfectly capture the injustice, but the overarching principle of equity provides arbitrators with the moral and legal compass to do what is fair and just. It enables them to recognize that a permanent, career-ending mark should not be the result of minor infractions or vague, misleading disclosures, particularly when no investor harm occurred.

Bakhtiari & Harrison: Your Guide in the Fight for Fairness

The Path to Expungement: How We Help You Reclaim Your Future

You’ve worked tirelessly to build your career. You understand the financial markets, and you’re committed to your clients. But now, you’re facing a formidable challenge: a FINRA disclosure that threatens everything you’ve worked for. You need a guide who understands the complexities of this battle, who can articulate your story with precision, and who possesses the authority to navigate the intricate FINRA expungement process.

At Bakhtiari & Harrison, we are that guide. We don’t just understand the rules; we understand the spirit behind them and, critically, how to leverage the principle of equity to advocate fiercely on your behalf. We know that successfully obtaining expungement is an “extraordinary remedy,” and we approach each case with the dedication and strategic insight required to achieve extraordinary results.

Our Proven Plan to Your Success:

Comprehensive Case Evaluation: We begin by meticulously reviewing your CRD disclosure, the underlying facts, and all relevant documentation. We identify the specific nuances of your situation and determine the strongest legal and equitable arguments for expungement, whether it falls under the explicit grounds of Rule 2080 or requires a broader appeal to fairness. We dissect U5 termination codes, review customer complaint narratives, and analyze internal firm documents to build a complete picture.
Strategic Case Development: Based on our evaluation, we develop a tailored strategy. This involves crafting compelling legal arguments, preparing a persuasive narrative that highlights the injustice of your disclosure, and assembling all necessary evidence. We work closely with you to gather witness testimony, documentary evidence, and any other materials that support your request for expungement. We anticipate potential objections and craft proactive responses.
Stellar Advocacy in Arbitration: Our experienced FINRA expungement lawyers will represent you throughout the arbitration process. We present your case to the arbitration panel with clarity, conviction, and a deep understanding of both the procedural rules and the overarching principles of equity. We are adept at cross-examining witnesses, presenting intricate legal arguments, and ensuring that your story – your truth – is heard and understood by the arbitrators. We highlight the disproportionate impact of the disclosure on your career and emphasize how expungement aligns with the broader interests of justice.
Court Confirmation (If Necessary): If the arbitration panel recommends expungement, we guide you through the crucial next step: obtaining a court order to confirm the arbitration award. This legal formality is essential to finalize the expungement process and ensure the information is permanently removed from your CRD and BrokerCheck records.

Why Choose Bakhtiari & Harrison? Experience That Delivers Results

The landscape of FINRA expungement is more challenging than ever with the recent rule changes. This isn’t a time for guesswork; it’s a time for proven experience. Our firm possesses:

Deep FINRA Experience: We live and breathe FINRA rules and procedures. We are intimately familiar with Rule 2080, the new expungement rules, and the nuances of FINRA arbitration.
A Track Record of Success: We have a history of achieving expungement for stockbrokers facing a wide range of disclosures, from complex customer complaints to unfair U5 terminations. We understand what it takes to win.
Client-Centered Approach: We understand the personal toll a disclosure takes. We provide compassionate, strategic, and aggressive representation, always prioritizing your best interests and your professional future.
Strategic Advocacy: We don’t just file papers; we build compelling cases that leverage both legal precedent and the powerful principle of equity, ensuring that arbitrators see the full picture of your situation and the inherent fairness of granting expungement.

Don’t Let a Disclosure Define Your Destiny.

The Cost of Inaction: What Happens If You Don’t Act?

The stakes couldn’t be higher. If you allow a negative disclosure to remain on your CRD and BrokerCheck, you risk:

Limited Employment Opportunities: Many firms will not even consider candidates with certain disclosures, regardless of their qualifications.
Loss of Client Trust: Clients frequently check BrokerCheck, and a negative mark can erode confidence and drive them away.
Stunted Career Growth: Advancement within your current firm or the ability to move to a more desirable role can be severely hampered.
Persistent Professional Shame: Living with an undeserved black mark on your record can be emotionally and professionally draining.

You deserve to have a professional record that accurately reflects your integrity and contributions to the financial industry. You deserve a fair chance to compete and succeed.

If you have a FINRA disclosure on your CRD or BrokerCheck and are interested in pursuing expungement, don’t wait. The new FINRA rules have introduced time limitations, making prompt action more critical than ever.

Contact Bakhtiari & Harrison today for a confidential consultation. Let our experienced FINRA expungement lawyers assess your situation, develop a winning strategy, and fight to clear your name. We have the experience, the proven results, and the unwavering commitment to help you reclaim your professional future.

Frequently Asked Questions (FAQs) About FINRA Expungement & Equity

What is FINRA expungement, and why is it important for stockbrokers? FINRA expungement is the process of removing false, erroneous, or misleading information from a stockbroker’s Central Registration Depository (CRD) and BrokerCheck records. It’s crucial because these disclosures can severely impact a broker’s ability to find employment, attract clients, and advance their career, essentially acting as a public, permanent black mark in an industry built on trust.

How do recent FINRA rule changes affect the expungement process? Effective October 16, 2023, FINRA implemented significant reforms. Key changes include requiring a three-arbitrator panel selected from a special roster for “straight-in” expungement requests (filed separately from customer arbitrations), limitations on striking arbitrators, and stricter time limits for filing expungement requests. These changes aim to enhance the integrity of the process and make it more challenging to obtain expungement.

What are the main grounds for expungement under FINRA Rule 2080 for customer-related cases? For customer-related disputes, FINRA Rule 2080 generally requires the associated person to demonstrate one of three grounds: 1) the claim or information is factually impossible or clearly erroneous; 2) the associated person was not involved in the alleged misconduct (e.g., sales practice violation, theft); or 3) the claim or information is false.

How does “equity” apply in FINRA expungement, especially in cases where FINRA Rule 2080 might not directly apply (e.g., industry-related)? Equity refers to the legal principle of fairness and justice, allowing arbitrators to go beyond rigid rules to achieve a just outcome. In FINRA expungement, especially for industry-related cases (like certain U5 disclosures), arbitrators can apply equity when the strict application of rules would lead to an unfair result. For instance, if a broker is effectively banned from the industry due to a vague U5 disclosure for a minor, non-investment related matter, equity compels arbitrators to consider whether the “punishment outweighs the crime.”

Why is it important that courts have ruled FINRA Rule 2080 is procedural and not substantive? This distinction is vital because it means FINRA Rule 2080 dictates how expungement requests are handled, not when they are substantively appropriate. This judicial interpretation allows arbitrators the flexibility to apply broader principles of equity and fairness in determining whether expungement should be granted, even if the specific criteria of Rule 2080 might not be literally met in a way that fully captures the injustice.

Can a stockbroker be permanently banned from the industry due to a non-investment related U5 disclosure, even if it’s not a customer complaint? While not an explicit “ban,” an ambiguous or poorly worded U5 disclosure related to a non-investment matter (e.g., an administrative issue, internal dispute) can, in practice, render a stockbroker unemployable. This “de facto ban” occurs because firms, cautious of regulatory scrutiny, may avoid hiring individuals with any type of negative U5 disclosure, regardless of its true context or severity. This is a prime example where the application of equity in expungement is crucial.

How does a negative BrokerCheck entry affect a stockbroker’s career? A negative entry on BrokerCheck significantly harms a stockbroker’s career by reducing their marketability to potential employers, eroding client trust (as clients often review BrokerCheck before engaging a financial professional), and potentially limiting opportunities for internal advancement. It creates a public perception of risk and unreliability.

What is the typical process for pursuing FINRA expungement? The process typically involves filing an arbitration claim with FINRA, usually naming the broker’s current or former firm. An arbitrator or a three-person panel (depending on the type of request) reviews the case in a hearing. The broker presents evidence and arguments to demonstrate that the disclosure meets the criteria for expungement. If successful, the arbitrator issues an award recommending expungement, which then usually requires a court order to finalize.

What evidence is usually needed to support a FINRA expungement request? Supporting evidence often includes the original customer complaint documents, firm investigation reports, U5 termination notices, internal communications, witness testimonies, employment records, performance reviews, and any other documents that prove the disclosure is false, erroneous, or that the broker was not involved in the alleged misconduct. For equitable arguments, evidence demonstrating disproportionate harm or the true context of an event is also critical.

How long does the FINRA expungement process typically take, and what are the chances of success after the new rules? The duration of the expungement process can vary, but it typically takes several months, sometimes longer, depending on the complexity of the case and FINRA’s arbitration calendar. While the new rules have made expungement more challenging, particularly for customer-related cases, success is still achievable with strong legal representation, meticulous preparation, and compelling arguments that effectively leverage both the specific expungement criteria and the broader principles of equity and fairness. Recent data indicates a decrease in overall expungement requests, but success rates for granted expungements in “straight-in” cases are still notable when the criteria are met.