Proposed Changes to FINRA Expungement Rules
Summary
SIFMA provided comments to the U.S. Securities and Exchange Commission (SEC) on FINRA’s proposed rule changes to the Code of Arbitration Procedure relating to requests to expunge customer dispute information from the Central Registration Depository (CRD) and FINRA BrokerCheck.
Excerpt
September 2, 2022
Via E-Mail to [email protected]
Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549-1090
Attn: Vanessa A. Countryman, Secretary
Re: File No. SR-FINRA-2022-024 SIFMA Comment on Proposed Changes to FINRA Expungement Rules
Dear Ms. Countryman:
The Securities Industry and Financial Markets Association (“SIFMA”)1 appreciates the opportunity to comment on FINRA’s proposed rule changes to the Code of Arbitration Procedure relating to requests to expunge customer dispute information from the Central Registration Depository (“CRD”) and FINRA BrokerCheck (the “Proposal”).2
SIFMA supports the goal of CRD and BrokerCheck to provide investors with complete and accurate information about firms and their financial advisors. We agree with FINRA’s assessment that information on CRD and BrokerCheck has investor protection value only if it is complete and accurate.3 SIFMA also supports the goal of FINRA’s expungement rules to balance, among other things, “the interests of investors in having access to accurate and meaningful information” and “the interests of the brokerage community in having a fair process to address inaccurate customer dispute information.”4
We respectfully submit the following comments and recommendations:
Executive Summary
• FINRA erroneously asserts that the current grounds for granting expungement are strictly limited to the three grounds listed in Rule 2080(b)(1), and do not include the grounds listed in Rule 2080(b)(2). Through the Proposal, FINRA seeks to codify its erroneous assertion.
• FINRA has never previously explained or justified why it would be fair or appropriate to limit the grant of expungement to the Rule 2080(b)(1) grounds, nor does it do so in the Proposal.
• FINRA has never previously solicited public comment concerning its alleged Rule 2080(b)(1) limitation, nor does it do so in the Proposal.
1 SIFMA is the leading trade association for broker-dealers, investment banks and asset managers operating in the U.S. and global capital markets. On behalf of our industry’s nearly 1 million employees, we advocate on legislation, regulation and business policy, affecting retail and institutional investors, equity and fixed income markets and related products and services. We serve as an industry coordinating body to promote fair and orderly markets, informed regulatory compliance, and efficient market operations and resiliency. We also provide a forum for industry policy and professional development. SIFMA, with offices in New York and Washington, D.C., is the U.S. regional member of the Global Financial Markets Association (GFMA). For more information, visit http://www.sifma.org.
2 SR-FINRA-2022-024 (July 29, 2022), https://www.finra.org/sites/default/files/2022-07/SR-FINRA-2022-024.pdf; Securities Exchange Act Release No. 34-95455 87 FR 590170 (August 15, 2022), https://www.finra.org/sites/default/files/2022-08/sr-finra-2022-024-federal-register-notice.pdf.
3 FINRA Notice 99-54 (July 1999), at p. 2 (“[FINRA] recognizes that information on the CRD system has important investor protection implications, provided it is complete and accurate”) (emphasis added), https://www.finra.org/sites/default/files/NoticeDocument/p004219.pdf.
4 Proposal at pp. 5-6 (emphasis added).