Registered representatives associated with FINRA member firms (“stockbrokers”) are often times the subject of public customer complaints regarding their investments. If the customer complaint meets certain criteria it may potentially be reportable on the stockbroker’s publicly available Broker-Check report, also referred to as the “CRD”. The Broker-Check report is available for public inspection on the FINRA website and may also be accessed on a link from the stockbroker’s website. The Broker-Check report is extremely important because customers oftentimes make decisions in regards to who they would use as his/her stockbroker based upon information contained within the Broker-Check report.
However, the stockbroker can seek to have a public customer complaint expunged from his/her CRD pursuant to FINRA Rule 2080. If the broker can establish that the claim, allegation or information is factually impossible, clearly erroneous, or false, then he/she can seek to have the customer complaint removed from his/her CRD by initiating an arbitration and participating in a telephonic FINRA hearing utilizing a sole arbitrator. The broker could also seek to establish that he/she had no involvement in the actions giving rise to the complaint. If the arbitrator finds that the stock broker was not involved in the actions giving rise to the complaint or that the complaint was factually impossible, clearly erroneous or false then the arbitrator can recommend that the complaint be expunged from the stock broker’s CRD.
In March 2018, a registered representative associated with Wells Fargo Clearing Services, LLC filed an arbitration asking the arbitrator to recommend that a disclosed customer complaint should be expunged because the allegations were factually impossible, clearly erroneous, or false. (See: Oliver v. Wells Fargo Clearing Services, LLC, FINRA Dispute Resolution # 18-00942.) The occurrence or event giving rise to the claim was the public disclosure of the customer’s allegations and the settlement of those claims which occurred on September 2, 2010. However, the stock broker did not file his Statement of Claim seeking expungement until March 8, 2018. The sole arbitrator denied the request for expungement on the basis that it was ineligible for arbitration because the complaint and settlement occurred more than 6 years prior to the filing of the Statement of Claim. According to FINRA Rule 13206 arbitrations must be filed within 6 years of the occurrence or event giving rise to the claim. The arbitrator determined that the eligibility period is a contractual bar to FINRA arbitration not a procedural limitation that might be extended by equitable principles.
FINRA practitioners must now contend with such eligibility issues in regards to disclosures which are reported outside of this six year time period.