On April 12, 2023, the Securities and Exchange Commission approved changes to FINRA’s expungement rules that will make the process more challenging for Associated Persons to seek expungement.  Although the Commission approved these changes, FINRA has not yet announced when the new expungement rules will go into effect.

Currently, FINRA Rule 2080 governs FINRA’s expungement process and permits arbitrators to issue an arbitration award recommending expungement if the Associated Person can establish (through a recorded evidentiary hearing) that: (1) the claim or allegation is factually impossible or clearly erroneous; (2) the Associated Person was not involved in the alleged conduct; or (3) the claim or allegation is false.  In cases involving settlements, arbitrators are additionally directed to review the settlement documents and consider the settlement amount and any other terms and conditions of the settlement.

To the extent an Associated Person is successful in obtaining a FINRA award recommending expungement, (s)he must then have the award confirmed in a court proceeding and provide FINRA with a court order directing it to expunge the customer dispute information – FINRA will only expunge the information upon receipt of a court order. [1]

In recent years, the current FINRA process has come under criticism.  Accordingly, FINRA worked with various organizations to address the following concerns: (1) Associated Persons were seeking to expunge old disputes; (2) customers were not participating in the expungement process, leaving Panels to only receive information from the Associated Person seeking expungement; and (3) Associated Persons were arbitrator shopping by making repeated attempts to expunge the same customer dispute information.

In an effort to address these concerns, in July 2022, FINRA filed a proposed rule change with the SEC seeking to impose additional requirements on expungement requests.  After reviewing the proposed changes and comments relating to same, the SEC approved the proposed rule change. [2]   The following is a summary of the key rule changes the SEC approved:


  • Requiring that the panel deciding the expungement request issue an award containing expungement relief only if the panel unanimously finds that the information to be expunged is factually impossible, clearly erroneous or false, or that the Associated Person was not involved in the alleged misconduct.
  • Requiring the Associated Person to appear at the expungement hearing in person or by video conference. Telephonic hearings will no longer be permitted.
  • Facilitating customer attendance and participation by notifying customers of the time, date and place of any prehearing conferences and the expungement hearing; codifying that customers are entitled to attend and participate in prehearing conferences and the expungement hearing and to be represented, if they choose; and providing customers with access to all relevant documents filed in the arbitration.
  • Specifically authorizing the panel to request any documentary, testimonial or other evidence that it deems relevant from the broker-dealer firm or Associated Person seeking expungement.
  • Requiring that the panel provide enough detail in the award to explain its rationale for including expungement relief in the award.
  • Precluding an Associated Person from requesting expungement of customer dispute information if a panel previously considered the merits of, or a court previously denied, a request to expunge the same customer dispute information.
  • Prohibiting an Associated Person who withdraws an expungement request from re-filing the request at a later date, thereby preventing “arbitrator shopping.”


“Straight-in” expungement requests are where Associated Persons commence a new arbitration against a broker-dealer solely for the purpose of seeking the expungement of customer dispute information from the Central Registration Depository (“CRD”) System.  Many of the changes under the newly approved rules seek to modify this process.

  • Imposing strict time limits within which Associated Persons may request expungement – FINRA Dispute Resolution Services (“DRS”) will deny the DRS arbitration forum if the expungement request is made:
    • More than three (3) years after the date the customer complaint was initially reported in the CRD system or
    • More than two (2) years after the close of the customer-initiated arbitration or civil litigation associated with the customer dispute information.
  • Requiring straight-in requests be filed against the broker-dealer firm where the Associated Person was registered at the time of the events giving rise to the customer dispute. Under the current rule, many Associated Persons commence “straight-in” requests against their current broker-dealer, not the one where they were registered when they received the complaint.  Accordingly, the broker-dealer named in the arbitration may not have any relevant records and may also have an interest in supporting the expungement to allow their Associated Persons to remove negative information from their CRD records.
  • FINRA will be required to notify state regulators within 15 days of receiving a “straight-in” expungement request. Since “straight-in” expungements are more likely to be unopposed by customers than expungements sought at the conclusion of a customer arbitration, the newly adopted rules permit an authorized representative of state securities regulators to attend and participate as a non-party in prehearing conferences and the expungement hearing.
  • All “straight-in” requests will be decided by a three-person arbitration panel, randomly selected from a roster of experienced public arbitrators with enhanced expungement training and with no significant ties to the industry. The parties will be prohibited from: (1) agreeing to fewer than three arbitrators to consider their expungement requests; (2) striking any of the selected arbitrators; (3) stipulating to an arbitrator’s removal; or (4) stipulating to the use of pre-selected arbitrators.  However, parties are permitted to challenge an arbitrator selected for cause.
  • If an Associated Person is named as a Respondent in a customer arbitration, the Associated Person will be prohibited from commencing a “straight-in” expungement request. Instead, the Associated Person must seek expungement of the customer dispute information associated with the arbitration claim during the arbitration proceeding or forfeit the ability to expunge that claim in any subsequent proceeding.[3]  Associated Persons must either include the expungement request in their Answer to the Statement of Claim or in a separate request filed no later than sixty (60) days before the first scheduled hearing begins.

WSS is closely monitoring developments in FINRA’s expungement process and will provide an update when FINRA announces when the amended expungement rules will go into effect.  If an Associated Person is considering seeking expungement of a prior customer complaint or arbitration, s(he) should consider doing so before the rule changes take effect.  If you have any questions regarding the expungement process and how the rule changes may affect you, please contact Michael Schwartzberg, Chair of the WSS Securities Litigation and Regulatory Group, or Jessica Levine, a Partner in the Group with substantial experience in expungement matters.

[1] Associated Persons may also seek expungement by a “direct- to-court” expungement action, where the Associated Person seeks a court order directing FINRA to expunge customer dispute information without first obtaining a FINRA award.  These types of expungements are filed much less frequently.

[2]A copy of the SEC’s April 12, 2023 notice can be found here

[3] One exception to the rule is that in a simplified arbitration (i.e., seeking $50,000 in damages or less), Associated Persons are permitted to file a straight-in expungement proceeding.