Categories of Disclosure Events That Are Ineligible for Expungement
For registered representatives and firms in the securities industry, maintaining an accurate and clean Central Registration Depository (CRD) record is important for reputation, client trust, and future employment. While FINRA permits expungement of certain disclosure events under specific conditions, it is equally important to understand that some categories of disclosure events are ineligible for expungement through the FINRA arbitration process—regardless of the circumstances. According to FINRA guidance and training materials, the following disclosure categories cannot be expunged through arbitration and will remain permanently on a broker's CRD record:
1. Civil Judicial Actions
Includes court proceedings in which:
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A broker was enjoined in connection with investment-related activity;
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Found that a broker was involved in a violation of any investment-related statutes or regulations; or
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Dismissed, pursuant to a settlement agreement, an investment-related civil action brought against a broker by a state or foreign financial regulatory authority.
2. Criminal Matters
Covers any:
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Felony charges or convictions;
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misdemeanors referenced on Forms U4 and U5, such as fraud, wrongful taking of property, or bribery.
3. Financial Matters
Disclosures involving:
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Bankruptcies (within 10 years);
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Compromises with creditors (within 10 years);
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Unpaid judgments or liens; or
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A bonding company's denial, payment on or revocation of a bond for a broker.
4. Regulatory Actions
Includes actions brought by:
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FINRA or other SROs;
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SEC or state regulators; or
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Foreign regulatory agencies.
These actions may involve findings of misconduct, sanctions, censures, bars, suspensions, or fines.
5. Investigation Disclosures
Any disclosures that a regulatory or governmental authority is conducting—or has conducted—an investigation involving the broker.
What Happens If an Ineligible Disclosure Is Expunged by Arbitrators?
Even if an arbitration panel issues an award directing expungement of one of these ineligible disclosure types, FINRA will not process or implement the expungement. The information will remain on the CRD record and, in most cases, continue to be displayed through FINRA's BrokerCheck system.
Important Takeaway
Only specific types of disclosure events—particularly customer disputes, employment terminations, and internal reviews—may be eligible for expungement under FINRA arbitration rules. Even then, strict procedural and substantive standards must be met.
If you're a registered representative considering an expungement request, it is crucial to understand which types of disclosures are eligible and to seek legal guidance to navigate FINRA's complex rules. Filing for expungement of an ineligible disclosure will waste time, effort, and cost without achieving the desired result.
If you have questions about your CRD record or whether an expungement is possible, call us today for a free consultation to discuss your options and protect your professional reputation.