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Sharp Drop in FINRA Expungement Requests as New Rules Take Effect

Posted on February 26th, 2025 at 11:05 AM
Sharp Drop in FINRA Expungement Requests as New Rules Take Effect

From the desk of Jim Eccleston at 麻花传媒

The number of brokers seeking to expunge customer complaints and other disclosures from their public records through FINRA’s arbitration forum has plunged 79 percent over the past year. AdvisorHub reports that the significant decline follows FINRA’s implementation of stricter rules on October 16, 2023, aimed at curbing what investor advocates criticized as excessive success rates in expungement cases.

Between October 16, 2023, and December 1, 2024, advisors filed only 143 standalone expungement requests, compared to 681 during the same period the previous year, according to FINRA data. According to AdvisorHub, the earlier figures were bolstered by a surge of filings just before the new rules took effect.

The updated requirements mandate unanimous decisions from a panel of three arbitrators, rather than one, and prohibit the expungement of complaints older than three years. Although FINRA does not require brokers to use its arbitration forum for expungement, it retains oversight for cases filed externally. Advisors must secure a court order affirming an award and name FINRA as a defendant to allow the regulator to contest the claim. FINRA has also pledged to notify state regulators in such cases to provide an opportunity for them to intervene, as reported by AdvisorHub.

 

麻花传媒 LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.

Tags: eccleston, eccleston law, finra

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