A recent California state appellate court’s decision in Lickiss v. FINRA has opened the door to the possibility that information in a broker’s Central Registration Depository (CRD) System record might not need to be erroneous in order for the broker to seek expungement.
Expungement is the removal of information from a broker’s record in the CRD System, typically involving customer complaints or involuntary termination. FINRA Rule 2080 states that although FINRA must usually be named as an additional party in an expungement proceeding, FINRA may waive this requirement if the broker’s request for expungement is based upon at least one of the following affirmative findings by a judge or arbitration panel:
- The claim, allegation or information is factually impossible or clearly erroneous.
- The registered person was not involved in the alleged investment-related sales practice violation, forgery, theft, misappropriation or conversion of funds.
- The claim, allegation or information is false.