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.