SIFMA Urges SEC to Disapprove FINRA Expungement Proposal

SIFMA urged the SEC to disapprove a FINRA proposal to amend the Code of Arbitration Procedure for Customer Disputes and the Code of Arbitration Procedure for Industry Disputes to impose additional requirements for expunging customer dispute information.

In its comment letter, SIFMA argued that (i) the proposal would limit the grounds for granting expungement without providing proper due process and (ii) the related release failed to provide justification or a cost-benefit analysis that supports limiting the grounds for expungement.

Further, SIFMA said that FINRA appears to be seeking to codify the mistaken belief that the current criteria for granting expungement under FINRA rules are limited to the grounds listed under FINRA Rule 2080(b)(1) ("Obtaining an Order of Expungement of Customer Dispute Information from the Central Registration Depository (CRD) System"). SIFMA warned that making it more difficult to have dispute information expunged will harm investors, and will unfairly damage member firms' business reputations. SIFMA said the proposal should be disapproved, or at the very least modified to continue to allow for the expungement of customer dispute information under FINRA Rule 2080(b)(2).