The Public Investors Arbitration Bar Association, also known as PIABA, studied arbitration cases in which the word “expungement” appeared. They found that since mid-May 2009 through the end of 2011 — expungement relief was granted in nearly every instance: 96.9% of cases. PIABA found, for example, one broker who requested expungement 40 times, and arbitration panels granted a clean record to that individual 35 times. Financial advisors/brokers seeking expungement are looking to remove investor complaints from the Central Registration Depository (CRD), the official database accessed by the public through state securities offices and FINRA’s BrokerCheck program.

Even though the Securities and Exchange Commission, SEC, approved FINRA rules related to expungement, the SEC did so with the understanding that the granting of such relief would be an ‘extraordinary’ remedy.

FINRA responded to the report, issuing a statement saying they are working to provide additional guidance and training to their arbitrators.

“As a result of these concerns, FINRA recently provided expanded guidance to assist arbitrators in the proper performance of their responsibilities with respect to expungement, and is enhancing arbitrator training with added emphasis on the importance of the integrity of the information in the CRD system,” the FINRA statement says. “While still significant, the number of arbitrator-recommended expungements executed by FINRA following a court order during the five-year period (838 orders) covered by the study is less than 5% of the total number of customer disputes filed (17,635).”

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