Sunday, December 22, 2013

Senators Grassley and Reed ask FINRA to respond on expungement of investor complaints against brokers

In an effort to protect investors and the integrity of FINRA’s BrokerCheck program, Senators Charles Grassley (R-IA) and Jack Reed (D-RI) urged FINRA to clarify and enhance standards for the expungement of investor complaints against brokers. The Senators are concerned about a recent study that revealed that a disturbing frequency of investor complaints being expunged or removed from publicly available broker records maintained by FINRA. Senator Grassley is the Ranking Member on the Judiciary Committee and Senator Reed is a key member of the Banking Committee.

In a bi-partisan letter to FINRA Chair Richard Ketchum, the Senators asked FINRA to provide, by January 6, 2014, the number of instances in which FINRA has questioned or challenged the provision of expungement relief and a detailed description of the circumstances each time. More broadly, the Senators ask FINRA to provide them with draft legislative language that would be necessary to provide FINRA with the authority to ensure that expungement relief is provided only when it has no meaningful investor protection or regulatory value, if FINRA does not believe that such authority already exists.

The Senators share FINRA’s view that expungement is an extraordinary remedy that should be granted only under appropriate circumstances and should be allowed only when it has no meaningful investor protection or regulatory value. However, the Senators also believe that meaningful investor protection includes the disclosure of whether a customer dispute was  settled. This is not just for the sake of transparency, but also to help prospective investors make informed decisions             about which firms or individual brokers to do business with.


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