SEC Approves FINRA Rule to Prohibit Conditioning Settlements on Expungement of Information from CRD

The SEC approved the new FINRA Rule 2081 prohibiting firms and registered representatives from conditioning settlement of a customer dispute on – or otherwise compensating a customer for – the customer's agreement to consent to, or to not oppose, the firm's or representative's request to expunge such information from the Central Registration Depository ("CRD") system. According to FINRA Chair Richard Ketchum, the new rule will protect "the integrity of the CRD system and disclosure of material information to investors."

The effective date of the rule will be published in a FINRA Regulatory Notice shortly.

See: SEC Order of Approval; FINRA Press Release. Related news: SIFMA Submits Comments to SEC on Proposed FINRA Rule Regarding Prohibited Conditions Relating to Expungement of Customer Dispute Information (May 14, 2014); FINRA Proposes Rule Regarding Prohibited Conditions Relating to Expungement of Customer Dispute Information (Fed. Reg.) (with Lofchie Comment) (April 23, 2014); FINRA Proposes Rule Regarding Prohibited Conditions Relating to Expungement of Customer Dispute Information (April 14, 2014).