Customer DIspute Disclosures

Clearing Your Record: How to Expunge Customer Dispute Information Under FINRA Arbitration Rules

If you're an associated person with customer dispute disclosures on your CRD record, you know the lasting damage these can cause—impacting employment, client relationships, and regulatory scrutiny. As of October 16, 2023, FINRA significantly tightened the expungement process. While expungement remains possible, the new rules make the process more rigorous, transparent, and limited.

What Is Expungement?

Expungement is the process of permanently removing customer dispute information from the CRD and FINRA's public BrokerCheck® database. Expungement is considered an extraordinary remedy and is only granted in narrowly defined circumstances. Under FINRA Rules 12805 and 13805, expungement may be recommended by an arbitration panel only when the broker establishes one of the grounds set forth in FINRA Rule 2080:

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

2. The registered person was not involved in the alleged misconduct; or

3. The claim, allegation, or information is false.

A unanimous finding by the arbitration panel is now required before any expungement can be granted.

Two Ways to Request Expungement

FINRA distinguishes between two procedural paths to request expungement of customer dispute information:

1. During a Customer Arbitration (Rule 12805 & Rule 12800)

If the disclosure relates to a customer arbitration, you must file for expungement during that proceeding, regardless of whether you were named as a respondent in the claim. You must include a request for expungement in your answer or a separate pleading requesting expungement.  If the associated person requests expungement in a pleading other than an answer, the request must be filed no later than 60 days before the first scheduled hearing; otherwise, the associated person must file a motion pursuant to Rule 12503 requesting an extension to file the expungement request.  Failing request expungement in the customer arbitration forfeits your right to seek expungement later.

Even in simplified arbitrations (claims under $50,000), a similar rule applies—requests must be raised in the original proceeding. The assigned arbitrator, who must have completed enhanced expungement training, will decide the expungement request.

2. “Straight-In” Expungement Requests (Rule 13805)

If there is no active arbitration—or if the customer case settled or closed without a hearing—you may pursue a “straight-in” expungement. These are new, standalone claims filed against the firm you were associated with at the time of the dispute. However, not all requests are allowed.

Enhanced Expungement Procedures

Major updates under the new rules include:

• Must be decided by a randomly selected three-person panel from FINRA's Special Arbitrator Roster—arbitrators with enhanced expungement training and experience.

• No stipulations to reduce panel size - three arbitrators are required.

• Parties cannot strike or pre-select arbitrators.

• The panel must unanimously agree that one of the three permissible grounds for expungement applies.

• State regulators are notified and may attend and participate in the hearing.

• In-Person or Video Appearance Required: The associated person must personally appear at the expungement hearing.

Further, expungement is prohibited if:

• The same request already has been denied in arbitration or court;

• The individual was found liable in the underlying case;

• The customer dispute is tied to a final regulatory action.

Strict Filing Timelines and Eligibility Limits

Under the revised rules:

• If the underlying customer arbitration or litigation closed after October 16, 2023, the expungement request must be filed within 2 years of the close.

• If the dispute was reported to CRD but never litigated or arbitrated, the request must be filed within 3 years of the initial CRD disclosure.

• All claims must also meet the general six-year eligibility window from the date of the underlying conduct (per Rule 13206).

Final Thoughts: A Narrow but Powerful Remedy

FINRA's revamped expungement rules prioritize regulatory integrity, investor protection, and fair process. While the bar is high, legitimate expungement is still possible when customer dispute information is false, clearly erroneous, or unrelated to your conduct. The path forward, however, now requires strategic planning, procedural compliance, and expert guidance.

Considering Expungement? Call Us for a Free Consultation
We'll evaluate your record, determine your eligibility under the new rules, and guide you through each step of the process to clear your name and protect your future.