DEFENDING YOUR PROFESSIONAL INTEGRITY
Stay current on recent changes in the regulatory environment
One of the variables that financial advisors have to take into account when deciding to pursue expungement of meritless customer disputes is the time span involved in obtaining an expungement award from FINRA.
Currently, the regulatory authority uses the traditional arbitration route for these disputes to be removed under Rule 2080. This means that FINRA utilizes the same procedures for expunging old meritless complaints as they do for the initial customer allegation or even intra-industry complaints (brokers vs. firms). Historically, FINRA arbitrations under Rule 2080 could be expected to take 12 months or more.
In some cases, this would make the pursuit of the expungement prohibitive to brokers simply on the basis of timing. If the advisor was looking to switch firms in the next several months, quickly apply for licensure in a particular state, or perhaps they were retiring in the next couple years, many of those potential cases would not conclude before results were needed.
However, it appears that all of the work FINRA has done over the last few years to expedite the process for relevant parties has been paying off.
FINRA has worked hard to increase case flow by adding additional arbitrators through incentives such as increasing the honorarium by 50%. And to make the process more efficient, FINRA now requires all cases and casework to be filed and exchanged through their online dispute resolution (DR) portal. Lastly, FINRA has all but stamped out frivolous motions filed by parties seeking to merely delay the process.
Obviously, in any arbitration proceeding such as this, there are variables in play that can extend the turnaround on these cases. Customers appearing without legal representation, delay in gathering documents for discovery, and even arbitrators personal vacation schedules can throw a wrench into an otherwise smooth process. Couple that with new proposed regulations that would require the introduction of state regulatory authorities and now may be an ideal climate for dispute disclosure expungement.
If a financial advisor wants to make right all of the false allegations of the past, we may be looking at the fastest turnaround and highest expungement rate ever available to brokers.
EA, Executive Vice President
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This blog is my ongoing effort to inform and educate FINRA licensed professionals about the evolving regulatory ecosystem in which we operate.