The SEC Has Approved FINRA’s New Expungement Proposal

Market News Daily - The SEC Has Approved FINRA's Expungement Proposal.
Market News Daily – The SEC Has Approved FINRA’s New Expungement Proposal.

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 Expungement

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.

Related: Investors Petition for the Resignation of FINRA CEO

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Market News Today - The SEC Has Approved FINRA's Expungement Proposal.
Market News Today – The SEC Has Approved FINRA’s New Expungement Proposal.

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  1. Society

    Sounds like a convicted male rapist who wears a condom. The victim does get f_cked.

  2. Frank Nez

    Leave your thoughts below.

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