Finra wants to prevent brokers from expunging older customer complaints from their disciplinary records.
In proposed changes to its arbitration procedure released Wednesday (http://www.finra.org/industry/notices/17-42 ) Finra wants to stop the growing practice of brokers seeking expungement of customer complaints that may have accumulated over the years.
The regulator wants to limit expungements to complaints that are no more than one year old.
Several industry attorneys actively involved with expungement cases questioned the one-year limit.
“It’s highly objectionable and totally unfair,” said David Robbins, a partner in the New York City law firm of Kaufmann Gildin & Robbins LLP. “I don’t see the rationale for that.”
“One year is way too short,” agreed Seth Lipner, a partner at Deutsch & Lipner of Garden City, N.Y., in an e-mail. “There should be a cutoff, but sometimes business or legal or health issues stand in the way of acting within a year.”
Brokers aren’t always notified when a complaint hits their record, or may not routinely check the CRD database known as BrokerCheck, said Dochtor Kennedy, of AdvisorLaw LLC in Broomfield, Colo.
Finra did not provide a reason for the proposed time limit.
The proposal would also require the use of three public chairperson-qualified arbitrators, who are all experienced attorneys. Parties to the case (usually just the broker seeking expungement) would not get to strike any of the panelists, and a decision to expunge information would have to be unanimous.
Requiring a unanimous decision instead of a majority “is a high bar” for a broker, Kennedy said.