The Financial Industry Regulatory Authority (FINRA) announced today that its Board of Governors approved a rule proposal that would prohibit firms and associated persons from conditioning settlements of customer disputes on, or otherwise compensating customers for, an agreement not to oppose a request to expunge information from an associated person’s Central Registration Depository (CRD) record. This proposal is designed to help ensure that the CRD system continues to contain information that is critical to investor protection.
FINRA operates the CRD system, which is an online registration and licensing system. The CRD system contains information regarding members and associated persons, including information such as personal, registration and employment history, as well as disclosure information such as criminal matters, regulatory and disciplinary actions, civil judicial actions and information relating to customer disputes. Much of the information in that system is available to investors through FINRA BrokerCheck. Brokers who wish to have customer dispute information removed from the CRD system and, thereby, from BrokerCheck, must obtain a court order directing expungement or confirming an arbitration award containing expungement relief.
The rule proposal will be submitted to the Securities and Exchange Commission for review, public comment, and approval.
The Financial Industry Regulatory Authority (FINRA) is a self-regulatory organization that plays a critical role in overseeing U.S. broker-dealers and protecting investors. Established in 2007 through the consolidation of the National Association of Securities Dealers (NASD) and the regulation, enforcement, and arbitration operations of the New York Stock Exchange (NYSE), FINRA operates as an independent, non-governmental entity. Its primary mission is to safeguard the integrity of the securities industry by enforcing rules that ensure fair and ethical conduct among broker-dealers and their registered representatives.
FINRA’s responsibilities include writing and enforcing rules that govern the activities of its member firms, conducting examinations and audits to ensure compliance with these rules, and administering a dispute resolution forum for investors and broker-dealers. Through these activities, FINRA promotes market transparency and fosters investor confidence.
Investor education is another key component of FINRA’s mission. The organization offers a wealth of resources to help individuals make informed investment decisions and recognize potential fraud. Additionally, FINRA maintains a public database, BrokerCheck, which provides detailed information about brokers and brokerage firms, including their professional backgrounds and disciplinary histories.
By maintaining a robust regulatory framework and emphasizing investor protection, FINRA plays an essential role in the stability and integrity of the U.S. securities markets, ensuring they operate fairly and efficiently for all participants.