What You Need to Know About FINRA’s New Expungement Rules—The Essentials

By: Erwin J. Shustak, Managing Partner       18 August 2023

FINRA’s amendments to the Code of Arbitration Procedure modifying the Process Relating to Expungement of Customer Dispute Information take effect October 16, 2023.  Many registered representatives have, or will have, “dings” on their CRD (Central Registration Depository) records, which have been readily available to the public through FINRA’s online, BrokerCheck portal

As more and more clients,  and the investing public generally, consult the BrokerCheck site to learn more about their current, or prospective financial representative, a “clean” CRD has become increasingly important, not only to assure clients, and prospective clients of the broker’s background and lack of customer complaints and arbitrations/litigations, but firms are increasingly wary of bringing on a lateral broker from another firm if that broker has a number of customer complaints on his or her record.  Expungement of customer complaints, therefore, is of increasing concern and interest to registered representatives.

Below summarizes the essentials of the new expungement rules.  There are many substantive and procedural changes each broker must be aware of.


The Financial Industry Regulatory Authority (FINRA) is a self-regulatory organization that oversees the securities industry in the United States. All broker-dealers, and all associated registered representatives, are subject to FINRA rules and procedures.  FINRA has rules in place to protect investors, including rules governing the expungement of customer dispute information.

FINRA maintains and controls the data bank of each broker dealer and each registered representative, including records relating to their work experience; licenses and registrations; regulatory items, and, most importantly, customer complaints.  Customer complaints fall into three categories, each of which will result in a disclosure on the broker’s CRD report which appears on the BrokerCheck portal for everyone with Internet access to see.  Those three categories are:

1. If a customer files a written, or oral complaint about his or her account, a security, lack of suitability, or virtually any complaint, if the broker is named in the complaint, the employing firm at the time must update that representative’s CRD record to reflect the complaint, regardless of the merit or lack thereof;

2. If a customer files a written or oral complaint with the employing firm, and does not expressly name the individual broker in the complaint, but the employing firm can determine from the complaint who was the broker in charge of the account (a very simple process), the employing firm must also update the CRD record of the individual broker, or brokers (in the case of a team), to reflect the complaint; and

3. If a customer initiates an arbitration or litigation, which either names the broker as a party to the case or identifies the broker as a person who took part in the activity that gave rise to the complaint, the employing firm must update the CRD records of the relevant broker(s).

FINRA has been working on amending the rules relating to expungement of customer complaints for several years, since the first proposal in 2020.  That process resulted in the Securities and Exchange Commission approving the new rules that take effect October 16, 2023.

What is Expungement?

The literal definition of expungement is “to erase or remove completely.” In the FINRA context, expungement is the process of removing information from public records, specifically the removal of customer dispute information from FINRA's Central Registration Depository (CRD) system.  Until any of the customer-initiated complaints listed above are officially “expunged” from the CRD records, they will remain visible to the public from FINRA’s BrokerCheck portal.

What are the Existing Expungement Rules?

The current FINRA rules governing expungement, now amended with the changes that become effective October 16, 2023, are complex and difficult to understand. They also made it difficult for customers to obtain expungement of their records.

What are the New Rules?

The new FINRA rules, which take effect October 16, 2023, are intended to simplify the expungement process, and make it easier for customers to have their records expunged of customer complaints, not intra-industry disclosure items.  So, the new rules only apply to the three types of customer complaint disclosure items listed above.  Intra-industry disputes (firm vs. broker; broker vs. firm) are not affected by the new rules and remain unchanged, at least for now.

Key Changes Under the New Rules:

The key changes under the new rules include:

* A new process for requesting expungement: Under the old rules, customers had to file a separate arbitration (known as a “straight in” case) to request expungement. Under the new rules, affected registered representatives can now request expungement as part of the underlying arbitration (if they are specifically named as respondents in the case)  or in a separate arbitration (a “straight in” action) if they are not named in the customer arbitration, or there was no arbitration; just an oral or written customer complaint that never proceeded to arbitration.

* Increased transparency: The new rules require FINRA to provide more information to customers about the expungement process, including the grounds for expungement and the factors that FINRA will consider when making an expungement decision.  The affected customer must be given notice of the expungement proceeding and afforded an opportunity to be heard at the hearing.

* Lower fees: The new rules reduce the fees that representatives must pay to file an expungement request.

Are There Benefits of the New Rules?

The new FINRA rules offer several benefits to affected representatives, including:

* A simpler, more streamlined process for requesting expungement;

* Increased transparency about the expungement process; and

* Lower fees

Are There Drawbacks to the New Rules?

There are a number of serious drawbacks to the new rules, including:

* If a representative is namedin a customer-initiated arbitration or litigation (they are a party to the case), they must seek expungement in the actual arbitration or waive their right to ever seek expungement of that claim.  This is a complication for several reasons.  First, the firm which may be paying for the defense may not want to “muddy” the waters by adding an expungement claim to a case they are defending.  They may refuse to do so, or tell the representative to hire his or her own attorney, which only complicates the actual arbitration;

* Currently, “straight in” expungement cases are heard by a single arbitrator trained in expungement issues and procedures.  Under the new rules, there must be 3 expungement arbitrators, which makes scheduling, and holding the mandatory hearing before an expungement request can be granted more time consuming, longer to schedule, and more expensive from a legal fee point of view;

* The time to seek expungement has been greatly shortened.  First, if a representative is named in a customer arbitration initiated after October 16, 2023, the expungement request, and accompanying paperwork, but be filed in that same arbitration.  If not timely filed, the expungement request cannot be filed after the case.  Second, if the representative is not named in the customer arbitration, he or she can initiate a “straight in” expungement arbitration but it must be commenced:  (i) within 2 years after conclusion of a customer arbitration if the representative has not been named in the arbitration; or (ii) in the case of a customer complaint that does not result in a customer initiated arbitration, within 3 years of when the customer made the complaint to the employing firm.  And (iii) in the case of all customer complaints, of any kind, filed before October 16, 2023, any expungement action must be filed (i) no later than 2 years from October 16, 2023, if there was a customer-initiated arbitration; or (ii) within 3 years from that date if the customer complaint never resulted in an arbitration.

Grounds for Expungement:

Under the new rules, registered representatives may be granted expungement of customer dispute information if they can show that one or more of these grounds for expungement applies:

* The claim, allegation, or information is factually impossible or clearly erroneous.

* The associated person was not involved in the alleged investment-related sales practice violation, forgery, theft, misappropriation, or conversion of funds. Or,

* The claim, allegation, or information is false.

Factors Considered by FINRA Arbitrators When Deciding Expungement Requests:

When making an expungement decision, FINRA arbitrators will consider these factors:

* The nature of the claim, allegation, or information.

* The severity of the allegation.

* The outcome of the underlying arbitration.

* The public interest.

The Process for Customers Requesting Expungement:

Often, we see situations where a customer filed a complaint that really was a complaint about the firm, not a particular broker, but the then employing firm still lists the complaint against the Representative in the CRD system.  There are many customers who, when told their complaint adversely affected or impacted their representative, are willing to initiate an expungement on their own.  

This is the simplest, cheapest, and best way to clear a customer complaint from your CRD records, provided you are on good terms with the client.  A client may request expungement of customer dispute information by filing a written request with FINRA. The request must include the following information:

* The customer's name.

* The name of the associated person or firm against whom the customer is seeking expungement.

* The specific customer dispute information that the customer is seeking to have expunged.

* The grounds for expungement.

* Any other relevant information.

We have used this route for some clients and have been successful in, essentially, having the customer withdraw their complaint or clarify the complaint was with the firm, and not the individual broker.


Customers who are denied expungement by FINRA may appeal the decision to the FINRA National Adjudicatory Council (NAC). The NAC will review the decision and make a final determination on whether to grant or deny expungement.


The new FINRA rules governing expungement are a significant improvement over the old rules. The new rules make it easier for representatives to have their records expunged, which can help to protect their reputation and financial interests. At the same time, the periods in which expungement must be sought have been significantly shortened and representatives can no longer sit back for some years and, if they get more “dings” on their records, seek to expunge them at one time. 

If you have customer dispute information in your FINRA CRD record that you believe should be expunged, we encourage you to contact us as soon as possible since the new rules take effect October 16, 2023.

Shustak Reynolds & Partners, P.C. has successfully guided thousands of financial professionals, investment advisors, and registered representatives through successful transitions,and we have successfully resolved botched transitions that went sideways before the transitioning advisors came to us.
Attorney Erwin J. Shustak can be reached in the firm’s San Diego office at (619) 696-9500.





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