The Securities and Exchange Commission (SEC) has approved FINRA’s expungement proposal.
FINRA filed the original version in September 2020 but withdrew the proposal in 2021 to make new modifications after investor attorneys and state securities regulators raised concerns that the reform would not sufficiently strengthen what they called a too-lenient expungement process.
So, what is expungement anyway?
Expungement is the process by which criminal record is destroyed or sealed from state or federal record.
An expungement order directs the court to treat the criminal conviction as if it had never occurred, essentially removing it from a defendant’s criminal record as well as, ideally, the public record.
The American Bar Association says, “It is important to clarify that expungement is not “forgiveness” for committing a crime—that is a legal pardon.
Likewise, pardons are not expungements and do not require removal of a conviction from a criminal record.
In the United States, pardons may be granted by public officials.”
Here’s what the new rule is intended to do.
What will FINRA’s Expungement Proposal Do?
FINRA’s new expungement rule will require brokers to file a straight-in expungement request within two years of the closing of a customer arbitration or civil litigation.
If there is no arbitration or litigation, the time limit is three years from when a customer complaint is filed in the Central Registration Depository system, which populates the public BrokerCheck database.
The rule also requires earlier notification of customers and state regulators when brokers seek expungement and allows state regulators to participate in straight-in requests.
“We’re thrilled,” said Richard Lewins, president of the PIABA Foundation and a Dallas securities attorney.
“This is a long time coming. This is all under the rubric of investor protection.”
“It’s a positive move forward,” said Berkson, a principal at McCarthy Lebit Crystal & Liffman.
“For too long, expungement has seemingly been an automatic process. You ask for it. You get it. The hope is that with the changes, expungement will be treated as it was designed to be — an extraordinary remedy.”
FINRA’s new expungement rule is certainly a start to setting stricter reform on institutions, but the self-regulatory agency still has a lot of work ahead of them when it comes to investor protection.
Market News Published Daily
For stock market, business news and updates, join the newsletter to receive weekly market news and notifications straight to your inbox.
Franknez.com is the media site that keeps retail investors informed.
- Gain access to EXCLUSIVE FrankNez articles you won’t find here.
- Become part of a private and safe Discord community, just for retail investors.
- Get drawn at the end of the year for holiday giveaways.
Recommended For You ✨
- A Massive Bank Now Closes Several Branches in Florida
- A US Company Now Declares An Unexpected Bankruptcy
- A US Bank is Now Denying Customers Access to Money
- California Now Has Massive Departures As Hundreds of Thousands Leave
- Wells Fargo is Now Freezing Bank Accounts in New Scandal
- The US Treasury Direct is Now Freezing Customer Accounts