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FINRA procedures with expungement in Pennsylvania

| Jul 7, 2021 | FINRA |

To avoid making bad investments in Pennsylvania, you should check with FINRA’s online database to vet a potential broker you want to work with. This database contains all the disclosure information about brokers and securities firms, including other customers’ complaints, criminal records, fraud, violations and misappropriation of funds. However, there are some instances where brokers and securities firms may have these records expunged. Here is what you need to know to ensure safe investments.

How it works

A broker or a security firm can only have their records expunged when the court asks FINRA to do so. A panel of independent arbitrators will examine the case and recommend that the court expunge the disclosures events on the firm’s or broker’s records.

Also, a broker or firm can directly go to the court without involving an arbitrator to expunge their disclosure records. This kind of expungement would be binding to FINRA.

FINRA procedure of expungement

Before expungement for a brokerage firm, investment advisor or broker-dealer, FINRA will consider certain procedural requirements. They include the following:

  • The arbitrators should hold a recorded hearing with the broker or firm, either in person or via telephone.
  • The arbitrators will review relevant documents, such as any payments or settlements owed to consumers.
  • If the arbitrators grant the expungement, they must explain why the broker or firm deserves this award following the FINRA Rule 2080.
  • Afterward, the court must confirm this award as the expungement requires information from FINRA Central Registration Depository system.
  • FINRA staff will review the settlement documents, the arbitration awards and other relevant information following the FINRA rules before granting the waiver.

Disclosures that cannot be expunged

There are some disclosures that FINRA cannot expunge. They include violations of investment-related statutes, criminal charges and convictions, financial issues, investigations by domestic or foreign government bodies, and regulations actions taken by federal or state authorities.

Why consult an attorney

An attorney may assist you in vetting a brokerage firm before investing. When you work with an attorney to thoroughly investigate your chosen broker or firm, you may have more peace of mind about entrusting your funds.

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