FINRA Broker Expungement

FINRA Expungement Summary
Expungement of information made on a Financial Industry Regulatory Authority (“FINRA”) broker’s official record, the Central Registration Depository (“CRD”) is important because the information set forth in the CRD can be viewed by prospective clients and employers. FINRA’s BrokerCheck website, which obtains its information from the CRD, is accessible to the public, making a broker’s personal information easily accessible to friends, family members, creditors, law enforcement and attorneys.

The Uniform Termination Notice for Securities Industry Registration, (also referred to as “Form U5”) requires a broker-dealer to truthfully represent various facts when a broker ceases employment with the broker-dealer. When a broker is terminated for any reason, FINRA rules require the broker-dealer to provide a “reason for termination” on the broker’s Form U5.  If the separation was contentious, or if the broker was “permitted to resign,” the broker-dealer must set forth a reason.  The broker-dealer could set forth an innocuous reason, such as “mutual agreement” or it can represent a more detailed reason for which it deems accurate, even if untrue.

Removing Inaccurate Information 
A broker-dealer has thirty (30) days from a broker’s last day of employment to file a Form U5.  A broker may not know what is set forth on the Form U5 until it is filed. Inaccuracies set forth on a broker’s Form U5 can cause substantial financial damages to a broker. Removing inaccurate, unfair or defamatory language generally requires filing a FINRA arbitration, requesting expungement.

A FINRA arbitration filed by a broker requesting expungement can also include other potential claims, including failure to receive compensation (bonus, commission, personal days) and employment discrimination. Some states provide damages for defamatory language set forth in a Form U5.

A broker can obtain expungement of some information set forth on a Form U5 if the broker proves defamation. FINRA arbitration panels have discretion to award damages and, contrary to formal legal proceeding, arbitration panels are not always required to issue detailed written decisions, rendering appeals rare, but possible.

The Form U5 is used by FINRA to determine whether a broker potentially violated any FINRA regulations or laws. As such, one important purpose of the form is to alert FINRA of potential misconduct and enable it to investigate, sanction and deter misconduct by brokers.

There are many instances when a broker-dealer issues a Form U5 that contains inaccurate or misleading information. In such situations, our firm represents the broker during the expungement process. Our firm appreciates that inaccurate information can cause substantial financial damages because future employers and clients will have access to the incorrect information.