FINRA Adopts Amendments to the Codes of Arbitration Procedure to Modify the Process Relating to the Expungement of Customer Dispute Information

Regulatory Notice 23-12

Published Date:

August 11, 2023

Effective Date: October 16, 2023

Summary

FINRA has adopted amendments to its Codes of Arbitration Procedure (Codes) to modify the process relating to requests to expunge customer dispute information in the FINRA Dispute Resolution Services (DRS) arbitration forum. The amendments impose requirements on expungement requests (a) filed by an associated person during an investment-related, customer-initiated arbitration (customer arbitration), or filed by a party to the customer arbitration on behalf of an associated person (on-behalf-of request), or (b) filed by an associated person separate from a customer arbitration (straight-in request). The primary changes include:

• requiring that a straight-in request be decided by a three-person panel that is randomly selected from a roster of experienced public arbitrators with enhanced expungement training (Special Arbitrator Roster);
• prohibiting parties to a straight-in request from agreeing to fewer than three arbitrators to consider their expungement requests, striking any of the selected arbitrators, stipulating to an arbitrator’s removal, or stipulating to the use of pre-selected arbitrators;
• providing notifications to state securities regulators of all requests to expunge customer dispute information and a mechanism for state securities regulators to attend and participate in expungement hearings in straight-in requests;
• imposing strict time limits on the filing of straight-in requests;
• specifying procedures for requesting expungement of customer dispute information during simplified customer arbitrations;
• codifying and updating the best practices in the Notice to Arbitrators and Parties on Expanded Expungement Guidance (Guidance) applicable to all expungement hearings, which include establishing additional requirements for expungement hearings, facilitating customer attendance and participation in all aspects of the expungement hearings and codifying the panel’s ability to request any evidence relevant to the expungement request;
• requiring the unanimous agreement of the panel to issue an award containing expungement relief; and
• establishing procedural requirements for filing expungement requests, which include on-behalf-of requests.

The amendments become effective on October 16, 2023.

• The amendments to Rules 12800 and 12805 apply to requests to expunge customer dispute information from the Central Registration Depository (CRD®) associated with a customer arbitration filed in the DRS arbitration forum on or after October 16, 2023.
• The amendments to Rules 13805 and 13806 apply to straight-in requests filed in the DRS arbitration forum on or after October 16, 2023.

The rule text is available in Attachment A. The Guidance is available in Attachment B. The Form Requesting Expungement on Behalf of an Unnamed Person is available in Attachment C.

Questions concerning this Notice should be directed to:

• Victoria Crane, Vice President and Associate General Counsel, Office of General Counsel, at (202) 728-8104 or [email](javascript:email(1576,'Victoria Crane'););
• Mignon McLemore, Associate General Counsel, Office of General Counsel, at (202) 728-8151 or [email](javascript:email(1014,'Mignon McLemore');); or
• Bria Adams, Principal Counsel, Office of General Counsel, at (202) 728-8829 or [email](javascript:email(2307,'Bria Adams');).

Background & Discussion

I. Customer Dispute Information in CRD

FINRA is mandated by federal statute to collect and maintain registration information about member firms and their associated persons. To satisfy this statutory responsibility, FINRA operates CRD, the central licensing and registration system for the benefit of FINRA, the SEC, other self-regulatory organizations (SROs), state securities regulators and firms.1 In general, the registration information in CRD is reported by firms, associated persons and regulatory authorities in response to questions on the uniform registration forms.2 These forms are used to collect registration information, which includes, among other things, administrative, regulatory, criminal history, financial and other information about associated persons, such as investment-related, customer-initiated arbitrations, civil litigations or customer complaints (i.e., customer dispute information). Customer dispute information maintained in CRD is reported through Forms U4 and U5.3

The registration information, including customer dispute information, maintained in CRD serves three important purposes. First, regulators use CRD as an important source of regulatory information to inform registrations, examinations, investigations and disciplinary actions. Second, firms use information in CRD for employment purposes. Third, FINRA makes specific registration information collected in CRD publicly available through BrokerCheck®,4 which is a free tool available on FINRA’s website to help investors make informed choices about the associated persons and firms with which they may conduct business.5

II. Expungement of Customer Dispute Information from CRD

If associated persons seek to remove, or “expunge,” customer dispute information from CRD/BrokerCheck, FINRA will do so only pursuant to a court order that directs expungement of the information or confirms an arbitration award that authorizes such expungement.6

FINRA rules specify a narrow set of circumstances in which expungement of customer dispute information from CRD is appropriate.7 As discussed in more detail below, the amendments incorporate this narrow set of circumstances into Rules 12805 and 13805 by requiring an arbitrator considering an expungement request to make a finding that the customer dispute information to be expunged is factually impossible, clearly erroneous or false, or that the associated person was not involved in the alleged misconduct.8 The amendments also make a number of significant enhancements to address concerns with the current expungement process9 and to provide additional safeguards for ensuring that the information in CRD/BrokerCheck is accurate and complete.

III. Amendments to the Codes

The amendments to the Codes require an associated person seeking expungement of customer dispute information to comply with the requirements of Rules 12805 (expungement requests in a customer arbitration), 12800(d) (expungement requests in a simplified customer arbitration) or 13805 (straight-in requests).10 The following discussion of the amendments is divided into seven areas:

• expungement requests during customer arbitrations under Rule 12805;
• expungement requests during simplified customer arbitrations under Rule 12800;
• straight-in requests under Rule 13805 and the Special Arbitrator Roster;
• requirements relating to all expungement hearings;
• notifications to customers of straight-in requests;
• notifications to state securities regulators of expungement requests and their attendance and participation in straight-in requests; and
• the Director’s authority to deny the forum.

A. Expungement Requests During Customer Arbitrations Under Rule 12805

The amendments to Rule 12805 set forth requirements addressing the method and timing for, and required contents of, expungement requests filed during a customer arbitration by an associated person or as an on-behalf-of request, including the types of expungement requests that must (or cannot) be filed. The amendments provide that an associated person shall not file a request for expungement of customer dispute information if (1) a panel11 held a hearing to consider the merits of the associated person’s request for expungement of the same customer dispute information or (2) a court of competent jurisdiction previously denied the associated person’s request to expunge the same customer dispute information.12 Under such circumstances, the Director shall decline the use of the forum because the expungement request is ineligible for arbitration.13

1. Expungement Requests Filed by an Associated Person Named in a Customer Arbitration

   The amendments require that an associated person named in a customer arbitration (named associated person) seeking to expunge customer dispute information associated with the customer’s statement of claim file the expungement request during the customer arbitration.14 If the associated person does not request expungement of the customer dispute information associated with the customer’s statement of claim during the customer arbitration, the associated person forfeits the opportunity to seek expungement of the same customer dispute information in any subsequent proceeding.15

   a. Method of Requesting Expungement

   The amendments limit how and when a request for expungement may be made during the customer arbitration. If a named associated person requests expungement during the customer arbitration, the request must be included in the answer or a separate pleading requesting expungement.16 If the request for expungement is included in the answer, it must be filed in accordance with existing requirements under the Codes—within 45 days of receiving the customer’s statement of claim.17 If the named associated person requests expungement in a separate pleading, rather than the answer, the request must be filed no later than 60 days before the first scheduled hearing.18 If a named associated person files the request for expungement in a separate pleading after the 60-day filing deadline, the associated person must file a motion pursuant to Rule 12503 requesting an extension, which would be decided by the panel.19

   b. Required Contents of an Expungement Request

   A request for expungement by a named associated person in a customer arbitration must include:

   • the applicable filing fee under the Customer Code;

   • the CRD number of the party requesting expungement;

   • each CRD occurrence number that is the subject of the request;

   • the case name and docket number associated with the customer dispute information; and

   • an explanation of whether expungement of the same customer dispute information was (i) previously requested and, if so (ii) how it was decided.20

     If an expungement request fails to include any of the requirements for requesting expungement, the request will be considered deficient and will not be served unless the deficiency is corrected.21

2. Expungement Requests Filed by a Party Named in a Customer Arbitration On Behalf Of an Unnamed Person

   Prior to the amendments, the Codes did not specifically address expungement requests made by a party named in a customer arbitration on behalf of an unnamed person (i.e., on-behalf-of requests).22 The amendments to Rule 12805 permit a party to the customer arbitration to file an on-behalf-of request (requesting party) during the customer arbitration that seeks to expunge customer dispute information associated with the customer’s statement of claim, provided the unnamed person consents in writing to the request and the request is eligible for arbitration under Rule 12805.23 Filing an on-behalf-of request is permissive, not mandatory.24

   If a named party files an on-behalf-of request, the named party must submit to the Director a signed Form Requesting Expungement on Behalf of an Unnamed Person (Form) together with the written request for expungement.25Rule 12805 does not require that an on-behalf-of request be included in an answer or a separate pleading requesting expungement. However, the requesting party must file the request together with the Form, no later than 60 days before the first scheduled hearing.26

   By filing an on-behalf-of request, the requesting party is agreeing to represent the unnamed person and the unnamed person’s interests and to pursue the request for expungement on behalf of the unnamed person during the customer arbitration.27 By signing the Form, the unnamed person is consenting to the filing of the on-behalf-of request and is agreeing to be bound by the terms of the Form and the panel’s decision on the request.28 In addition, by signing the Form, the unnamed person is acknowledging that (i) if the customer arbitration closes by award after a hearing, the unnamed person is barred from filing a request to expunge the same customer dispute information in any subsequent proceeding and (ii) if the requesting party withdraws or does not pursue the on-behalf-of request, the panel is required to deny the on-behalf-of request with prejudice.29 The unnamed person’s signature on the Form would serve as acknowledgement of these consequences.

   In addition to the Form, an on-behalf-of request must include the same elements described above for a request for expungement by a named associated person during a customer arbitration.30

3. Deciding Expungement Requests Filed During Customer Arbitrations

   The amendments to Rule 12805 specify whether a panel is required to decide an expungement request (whether filed by a named associated person or by a party on behalf of an unnamed person); specifically, whether the panel is required to decide an expungement request filed during a customer arbitration depends on how the customer arbitration closes: (1) by award after a hearing or (2) other than by award or by award without a hearing.

a. Panel Decides the Expungement Request if the Customer Arbitration Closes by Award after a Hearing

If a named associated person files an expungement request or a party files an on-behalf-of request during a customer arbitration, and the customer arbitration closes by award after a hearing, the panel must decide the expungement request during the customer arbitration in accordance with Rule 12805(c).31 The panel’s decision on the expungement request must be included in the same award as the decision on the customer arbitration.32 If an expungement request is filed during the customer arbitration, the panel must decide the expungement request, even if the associated person or requesting party withdraws or fails to pursue the request, in which case, the panel shall deny the expungement request with prejudice.33

b. Panel Does Not Decide Expungement if the Customer Arbitration Closes Other than by Award or by Award without a Hearing

If, however, a named associated person files an expungement request or a party files an on-behalf-of request during the customer arbitration, and the customer arbitration closes other than by award or by award without a hearing, the panel from the customer arbitration shall not consider the expungement request.34 Instead, the associated person may file a request for expungement of the customer dispute information as a straight-in request under Rule 13805 against the member firm at which the person was associated at the time the customer dispute arose, provided the straight-in request is not barred under Rule 13805(a)(2). A panel that is randomly selected from the Special Arbitrator Roster will decide the straight-in request.35

B. Expungement Requests During Simplified Customer Arbitrations Under Rule 12800

The amendments to Rule 12800 governing simplified customer arbitrations36 establish procedures for requesting and deciding expungement requests in these types of arbitrations that are consistent with the expedited nature of the arbitrations.37

In a simplified customer arbitration, if a named associated person or party on behalf of an unnamed person does not submit a request for expungement, the associated person or unnamed person may file a straight-in request, provided the straight-in request is not barred under Rule 13805(a)(2). If, however, a named associated person or a requesting party submits a request for expungement in a simplified customer arbitration, the single arbitrator deciding the simplified customer arbitration must decide the expungement request, regardless of how the simplified customer arbitration closes.38 The single arbitrator who is appointed from the public chairperson roster to decide a simplified customer arbitration must evidence successful completion of, and agreement with, enhanced expungement training provided by DRS prior to deciding any expungement request in a simplified customer arbitration.39 Thus, the arbitrator must complete the same enhanced expungement training as the arbitrators on the Special Arbitrator Roster.40

1. Expungement Requests Filed by an Associated Person Named in a Simplified Customer Arbitration

   If a named associated person files an expungement request during the simplified customer arbitration, the request must be included in an answer or a separate pleading requesting expungement.41 If the associated person requests expungement in a separate pleading, the request must be filed within 30 days after the date FINRA notifies the parties of the appointment of the arbitrator.42The written expungement request must include the same information as a request filed in a customer arbitration not administered as a simplified proceeding.43

2. Expungement Requests Filed by a Party Named in a Simplified Customer Arbitration On Behalf Of an Unnamed Person

   The requirements for a party to file an on-behalf-of request during a simplified customer arbitration are the same as the requirements for a named associated person filing an expungement request during a simplified customer arbitration. As with a customer arbitration filed under Rule 12805(a)(2), a named party may only file an on-behalf-of request during a simplified customer arbitration with the written consent of the unnamed person evidenced by the requesting party’s submission of the Form that is signed by the requesting party and the unnamed person.44

3. Deciding Expungement Requests during Simplified Customer Arbitrations

   As noted above, if a named associated person or a party on behalf of an unnamed person files an expungement request during a simplified customer arbitration, the arbitrator must decide the expungement request, regardless of how the simplified customer arbitration closes (e.g., even if the simplified customer arbitration settles).45 How and when the expungement request is decided depends on which option the customer selects to decide the simplified customer arbitration. In a simplified customer arbitration, the customer has the option of having the case decided in one of three ways: (1) without a hearing (referred to as “on the papers”), where the arbitrator decides the dispute on the pleadings or other materials; (2) in an “Option One” full hearing, in which prehearings and hearings on the merits take place pursuant to the regular provisions of the Customer Code; or (3) in an “Option Two” special proceeding, whereby the parties present their case in a hearing to the arbitrator in a compressed timeframe, so that the hearings last no longer than one day.46 If an associated person or requesting party files and then withdraws or does not pursue the expungement request, the arbitrator must deny the request with prejudice.47

a. No Hearing or Option Two Special Proceeding

If the customer opts not to have a hearing or chooses an “Option Two” special proceeding, the arbitrator must decide the customer’s dispute first and issue an award.48 After the arbitrator decides the customer’s dispute, the arbitrator must hold a separate expungement hearing to decide the expungement request, and the arbitrator must issue a decision on the expungement request in a separate, subsequent award.49

b. Option One Hearing

If the customer chooses to have a full “Option One” hearing and the customer arbitration closes by award after a hearing, the arbitrator must decide the expungement request during the customer arbitration and include the decision on the expungement request in the same award as the decision on the customer’s dispute.50 (This process is the same as deciding an expungement request during a customer arbitration not administered as a simplified proceeding that closes by award after a hearing, where the customer’s claim and expungement request are addressed during the customer arbitration.)

If the customer chooses to have a full “Option One” hearing and the simplified customer arbitration closes other than by award or by award without a hearing, the arbitrator must hold a separate expungement-only hearing to decide the expungement request and issue a separate award containing the decision on the expungement request.51

C. Straight-In Requests Under Rule 13805 and the Special Arbitrator Roster

An associated person may file a straight-in request under Rule 13805 if: (1) the associated person is named in a customer arbitration or a party submits an on-behalf-of request and the arbitration closes other than by award or by award without a hearing; (2) the associated person is the subject of a customer arbitration, but is not named in the arbitration and did not consent to an on-behalf-of request; or (3) the associated person was named in a simplified customer arbitration or was the subject of the simplified customer arbitration, but no expungement request was filed during the simplified customer arbitration.

1. Filing a Straight-in Request Under Rule 13805

a. Applicability and Required Contents of Straight-in Requests

An associated person requesting expungement of customer dispute information as a straight-in request under the Industry Code must file a statement of claim in accordance with Rule 13302 against the member firm at which the person was associated at the time the customer dispute arose, provided the straight-in request is not barred under Rule 13805(a)(2).52 The requirement that an associated person file a straight-in request against the member firm at which the person was associated at the time the customer dispute arose is intended to help ensure that there is a connection between the respondent firm and the subject matter of the expungement request. If the associated person does not name a respondent firm with the requisite connection, the Director is authorized to deny use of the DRS arbitration forum for the request.53 If the associated person files and then withdraws or does not pursue the request for expungement, the panel shall deny the expungement request with prejudice.54

The required contents of a straight-in request are the same as those required for expungement requests filed in customer arbitrations under Rule 12805.55

b. General Limitations on Filing Straight-in Requests

The amendments limit when straight-in requests may be filed under the Industry Code. Specifically, Rule 13805(a)(2) provides that straight-in requests are ineligible for arbitration under the Industry Code, if:

• a panel held a hearing to consider the merits of the associated person’s request for expungement of the same customer dispute information;
• a court of competent jurisdiction previously denied the associated person’s request to expunge the same customer dispute information;
• the customer arbitration, civil litigation or customer complaint associated with the customer dispute information has not closed;
• a panel or court of competent jurisdiction previously found the associated person liable in a customer arbitration or civil litigation associated with the same customer dispute information;
• the customer dispute information involves the same conduct that is the basis of a final regulatory action taken by a securities regulator or SRO;56 or
• the associated person is prohibited from seeking expungement because they did not request expungement in a customer arbitration in accordance with Rule 12805(a)(1)(A).57

c. Time Limitations Applicable to Filing Straight-in Requests

The amendments establish time limits for filing straight-in requests under the Industry Code that are tied to when a customer arbitration or civil litigation closes, or when a customer complaint is initially reported to CRD.

i. Time Limitations Associated with Customer Arbitrations or Civil Litigations Closed, and with Customer Complaints Initially Reported to CRD, After the Effective Date

If an associated person is seeking to expunge in a straight-in request customer dispute information associated with a customer arbitration or civil litigation, including any associated customer complaint disclosures, and the customer arbitration or civil litigation closes after the effective date of the amendments, the associated person must file the straight-in request within two years after the close of the customer arbitration or civil litigation.58 If an associated person is seeking to expunge a customer complaint in a straight-in request when there is no customer arbitration or civil litigation associated with the customer complaint, and the customer complaint was initially reported to CRD after the effective date of the amendments, the associated person must file the straight-in request within three years after the customer complaint was initially reported to CRD.59

ii. Time Limitations Associated with Customer Arbitrations or Civil Litigations Closed, and with Customer Complaints Initially Reported to CRD, On or Before the Effective Date

If an associated person is seeking to expunge in a straight-in request customer dispute information associated with a customer arbitration or civil litigation that closed on or before the effective date of the amendments, the associated person must file the straight-in request within two years after the effective date of the amendments.60 If an associated person is seeking to expunge in a straight-in request customer dispute information associated with a customer complaint initially reported to CRD on or before the effective date of the amendments, the associated person must file the straight-in request within three years after the effective date of the amendments.61

These straight-in requests to expunge customer dispute information are also subject to the six-year eligibility requirement of Rule 13206(a), which provides that no claim shall be eligible for submission to arbitration where six years have elapsed from the occurrence or event giving rise to the claim.62 This six-year eligibility rule applies to all arbitration claims, including those requesting expungement of customer dispute information.

2. Panel from the Special Arbitrator Roster Under Rule 13806

If an associated person requests expungement under Rule 13805, the amendments require that a three-person panel randomly selected from the Special Arbitrator Roster in accordance with Rule 13806 must hold an expungement hearing, decide the straight-in request and issue an award.63

To help ensure that arbitrators on the Special Arbitrator Roster have the qualifications and training to decide straight-in requests under the amendments, there are several requirements. They must:

• qualify as public arbitrators64 who are eligible for the chairperson roster;65

• have evidenced successful completion of, and agreement with, enhanced expungement training provided by DRS;66 and

• have served as an arbitrator through award on at least four customer arbitrations administered by FINRA or by another SRO in which a hearing was held.67

  The list selection algorithm68 will select randomly the three public arbitrators from the Special Arbitrator Roster to decide a straight-in request filed by an associated person.69 The parties are not permitted to agree to fewer than three arbitrators.70 The parties also are not permitted to strike any arbitrators selected by the list selection algorithm or stipulate to their removal, but the parties are permitted to challenge an arbitrator selected for cause.71 If an arbitrator is removed, the list selection algorithm randomly selects a replacement.72

D. Requirements Relating to All Expungement Hearings

The amendments expand the expungement hearing requirements in Rules 12805 and 13805 and incorporate relevant provisions from the Guidance:

• a panel must hold one or more recorded hearing sessions regarding the expungement request;73
• the associated person whose information in CRD is the subject of the expungement request must appear in person or by video conference at the expungement hearing;74
• all customers whose customer arbitrations, civil litigations or customer complaints are the subject of an expungement request are entitled to have a representative attend and participate in all aspects of the expungement hearing;75
• the panel may request from the associated person, the party filing an on-behalf-of request and the member firm at which the person was associated at the time the customer dispute arose, as applicable, any documentary, testimonial or other evidence that the panel deems relevant to the expungement request;76
• the panel must review any settlement documents related to the customer dispute information that is the subject of the expungement request and consider the amount of payments made to any party and any other terms and conditions of the settlement;77
• the panel must agree unanimously78 that one or more of the three narrow grounds for expungement enumerated in Rules 12805(c)(8)(A)(i) or 13805(c)(9)(A)(i), as applicable, has been established to issue an award containing expungement relief;79
• the panel must provide a written explanation of the reason(s) for its finding that one or more of the grounds for expungement identified in Rules 12805(c)(8)(A)(i) and 13805(c)(9)(A)(i) apply to the facts of the request, and identify any specific documentary, testimonial or other evidence on which the panel relied in awarding expungement relief;80
• the panel must not give any evidentiary weight to a decision by a customer (or an authorized representative of the state securities regulators (authorized representative) in the case of a straight-in request) not to attend or participate in an expungement hearing when making a determination of whether expungement is appropriate;81 and
• the panel must assess against the party or parties requesting expungement all DRS arbitration forum fees for each hearing session in which the sole topic is the determination of the appropriateness of expungement.82

E. Notifications to Customers of Straight-in Requests

To help facilitate customer awareness of and participation in straight-in requests, the amendments require an associated person seeking expungement relief and the Director to provide notifications to customers.

Specifically, the amendments require that the associated person serve all customers whose customer arbitrations, civil litigations or customer complaints are the subject of the expungement request with a copy of the statement of claim requesting expungement and any answer within 10 days of filing.83 The associated person must provide a current address for the customer,84 or the expungement request will be considered deficient and will not be served.85The associated person must also file with the panel proof of service to the customers of the statement of claim filed by the associated person and any answers filed by a member firm, copies of all documents provided by the associated person to the customers and copies of all communications sent by the associated person to the customers and any responses received from the customers.86

Furthermore, the amendments require the Director to notify all customers whose customer arbitrations, civil litigations or customer complaints are the subject of the expungement request, of the time, date and place of any prehearing conferences and the expungement hearing.87 The Director will also provide the notified customers with access to all documents that are relevant to the expungement request that are filed in (a) the straight-in request and (b) any prior customer arbitration brought by the customer that is a subject of the expungement request.88 This provides the notified customer with access to documents surrounding the request for expungement prior to their attendance and participation in the expungement hearing.

F. Notifications to State Securities Regulators of Expungement Requests and their Attendance and Participation in Straight-In Requests

To help ensure that state securities regulators are timely notified of expungement requests, the amendments require the Director to notify state securities regulators, in the manner determined by the Director in collaboration with state securities regulators, of an expungement request within 15 days of receiving an expungement request that includes all of the required elements.89

In addition, the amendments provide a mechanism for an authorized representative to provide the state securities regulators’ position(s) on an expungement request made in a straight-in request in writing or by attending and participating in the expungement hearing in person or by video conference.90 Including states securities regulators in straight-in requests provides states the opportunity to satisfy their regulatory obligations, while at the same time increasing the likelihood that the panel in a straight-in request hears evidence from multiple viewpoints, thereby allowing the panel to make informed decisions.

The Director will also provide state securities regulators with access to all documents relevant to (a) the straight-in request and (b) any prior customer arbitration brought under the Customer Code that is associated with the customer dispute information that is a subject of the straight-in request.91

If an authorized representative notifies the Director no later than 30 days after the last answer is due that the authorized representative intends to attend and participate in the expungement hearing, the Director will notify the authorized representative of the time, date and place of any prehearing conferences and the expungement hearing.92 At the expungement hearing, the authorized representative may: (1) introduce documentary, testimonial, or other evidence; (2) cross-examine witnesses; and (3) present opening and closing arguments if the panel allows any party to present such arguments.93 The other participants appearing at the expungement hearing could state objections to the authorized representative’s evidence and cross-examine the authorized representative’s witnesses.94

G. Director’s Authority to Deny the Forum

The amendments explicitly authorize the Director to decline the use of the DRS arbitration forum to request expungement if an associated person files an expungement request that the Director determines is ineligible for arbitration under Rules 12805 and 13805.95 The amendments also provide the Director with express authority to decline the use of the DRS arbitration forum if the Director determines that the expungement request was not filed under, or considered in, the arbitration forum in accordance with Rules 12805 or 13805.96

Endnotes

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1 The concept for CRD was developed by FINRA and the North American Securities Administrators Association (NASAA). CRD fulfills FINRA’s statutory obligation to establish and maintain a system to collect and retain registration information set forth in Section 15A(i) of the Securities Exchange Act of 1934 (Exchange Act). NASAA and state securities regulators play a critical role in the ongoing development and implementation of CRD.

2 The uniform registration forms are Form BD (Uniform Application for Broker-Dealer Registration), Form BDW (Uniform Request for Broker-Dealer Withdrawal), Form BR (Uniform Branch Office Registration Form), Form U4 (Uniform Application for Securities Industry Registration or Transfer), Form U5 (Uniform Termination Notice for Securities Industry Registration) and Form U6 (Uniform Disciplinary Action Reporting Form).

3 FINRA, NASAA and state securities regulators developed Forms U4 and U5, and they were approved by the SEC. Any amendments to these uniform registration forms require collaboration with, and agreement between FINRA, NASAA and state securities regulators before being filed with the SEC for approval. Several questions on Forms U4 and U5 require associated persons to disclose certain investment-related, customer-initiated arbitrations, civil litigations or customer complaints which allege sales practice violations. See Form U4, Question 14I and Form U5, Question 7E.

4 BrokerCheck fulfills FINRA’s statutory obligation under Section 15A(i) of the Exchange Act to establish and maintain a readily accessible electronic or other process, to receive and promptly respond to inquiries regarding registration information on, among others, firms and their associated persons. A detailed description of the information can be found at BrokerCheck.

5 As part of its statutory obligation, FINRA publishes on BrokerCheck extensive disclosure information, including customer dispute information for associated persons who are currently or were formerly registered with FINRA. Formerly registered associated persons, although no longer in the securities industry in a registered capacity, may work in other investment-related industries or may seek to attain other positions of trust with potential investors. Pursuant to FINRA rules, which are approved by the SEC, records for formerly registered associated persons are available in BrokerCheck for 10 years after an associated person leaves the brokerage industry, and records for formerly registered associated persons who were the subject of disciplinary actions and certain other disclosure events remain on BrokerCheck permanently.

6See Rule 2080(a).

7 See Rule 2080(b)(1).

8 See Rules 12805(c)(8)(A)(i) and 13805(c)(9)(A)(i).

9 See Securities Exchange Act Release No. 95455 (August 9, 2022), 87 FR 50170, 50174 (August 15, 2022) (Notice of Filing of File No. SR-FINRA-2022-024) (Proposing Release) (discussing concerns with the current expungement process).

10 See Securities Exchange Act Release No. 97294 (April 12, 2023), 88 FR 24282 (April 19, 2023) (Order Approving File No. SR-FINRA-2022-024).

11 Under the Codes, the term “panel” means the arbitration panel, whether it consists of one or more arbitrators. See Rules 12100(u) and 13100(s). Unless otherwise specified, this Notice uses the term “panel” to mean either a panel or single arbitrator.

12 See Rule 12805(a)(1)(B).

13 See Rule 12203(b).

14 See Rule 12805(a)(1)(A). The customer dispute information associated with a customer’s statement of claim would include a written customer complaint or civil litigation brought by the same customer that addresses the same allegations.

15 See Rule 12805(a)(1)(A).

16 See Rule 12805(a)(1)(C)(i). Rules 12100(x) and 13100(v) define a “separate document requesting expungement” as a pleading under the Codes.

17 See Rule 12303(a) and (b).

18 See Rule 12805(a)(1)(C)(i).

19 See Rule 12805(a)(1)(C)(i). Pursuant to Rule 12503, if an associated person files a motion seeking an extension of the 60-day deadline, the opposing parties may state objections to extending the deadline, and the panel would decide the motion.

20 See Rule 12805(a)(1)(C)(ii)a. through e. To comply with the requirement that the request for expungement include an explanation of whether expungement of the same customer dispute information was (i) previously requested and, if so, (ii) how it was decided, the associated person should include any arbitration award or court order denying expungement of the same customer dispute information, and, if applicable, any court order modifying, vacating or otherwise setting aside an arbitration award of the same customer dispute information.

21 See Rules 12307(a)(8) through (11) and 12805(a)(1)(C)(ii).

22 The amendments define an unnamed person as “an associated person, including a formerly associated person, who is identified in a Form U4, Form U5, or Form U6, as having been the subject of an investment-related, customer-initiated arbitration claim that alleged that the associated person or formerly associated person was involved in one or more sales practice violations, but who is not named as a respondent in the arbitration.” See Rule 12100(ff).

23 See Rule 12805(a)(2)(A) and (B).

24 See Rule 12805(a)(2)(A). If a party to the customer arbitration does not request expungement on behalf of the unnamed person, the unnamed person is prohibited from intervening in the customer arbitration to request expungement. See Rule 12805(a)(2)(E)(iii)a. The unnamed person may, however, file the request for expungement of the customer dispute information as a new claim under Rule 13805 against the member firm at which the person was associated at the time the customer dispute arose. See Rule 12805(a)(2)(E)(iii)b. Provided that the request for expungement is not barred, a panel from the Special Arbitrator Roster would decide the request for expungement after the customer arbitration has closed. See Rule 13805(a)(2)(A)(iii).

25 See Rule 12805(a)(2)(C)(i) and (ii); see also Attachment C. The unnamed person whose CRD record would be expunged and the party requesting expungement on the unnamed person’s behalf must sign the Form.

26 See Rule 12805(a)(2)(C)(iii).

27 See Rule 12805(a)(2)(D)(iii).

28 See Rule 12805(a)(2)(D)(i). By signing the Form, the unnamed person is also agreeing to maintain the confidentiality of documents and information from the customer arbitration to which the unnamed person may be given access and to adhere to any confidentiality agreements or orders associated with the customer arbitration. See Rule 12805(a)(2)(D)(ii). A breach of this provision by the unnamed person could potentially subject the unnamed person to a claim for damages by an aggrieved party.

29 See Rule 12805(a)(2)(E)(i).

30 See Rules 12805(a)(1)(C)(ii) and 12805(a)(2)(C)(i); see also supra Section III.A.1.b (Required Contents of an Expungement Request).

31 See Rules 12805(a)(1)(D)(i) and 12805(a)(2)(E)(i).

32 See Rules 12805(a)(1)(D)(i) and 12805(a)(2)(E)(i).

33 See Rules 12805(a)(1)(D)(i) and 12805(a)(2)(E)(i).

34 See Rules 12805(a)(1)(D)(ii)a. and 12805(a)(2)(E)(ii)a.

35 See Rules 12805(a)(1)(D)(ii)b. and 12805(a)(2)(E)(ii)b.

36 Simplified customer arbitrations are arbitrations involving $50,000 or less.

37 See Rule 12800(d) and (e). Rule 12800 provides customers with expedited procedures to make the DRS arbitration forum economically feasible for these smaller claims. Simplified customer arbitrations are decided on the pleadings and other materials submitted by the parties, unless the customer requests a hearing. Further, a single arbitrator from the public chairperson roster is appointed to decide simplified customer arbitrations, unless the parties agree in writing otherwise. For ease of reference, when discussing expungement requests in simplified customer arbitrations, this Notice uses the term “arbitrator,” unless otherwise specified, to mean either a panel or single arbitrator.

An associated person may not seek expungement in a simplified customer arbitration administered under Rule 13800 under the Industry Code. See Proposing Release, supra note 9 at 50186 n. 189.

38 See Rules 12800(d)(1)(B)(ii) and 12800(e)(1).

39 See FINRA DRS Arbitrator Training.

40 See Rule 12800(b); see also supra note 39; infra Section III.C.2. (Panel from the Special Arbitrator Roster Under Rule 13806).

41 See Rule 12800(d)(1)(B)(i). A respondent’s answer must be submitted within 45 days of receipt of the statement of claim.

42 See Rule 12800(d)(1)(B)(i). When FINRA notifies the parties that an arbitrator has been appointed, FINRA informs the parties that they have 30 days from the date of notification to submit additional documents or other information before the case is submitted to the arbitrator.

43 See Rules 12800(d)(1)(B)(i) and 12805(a)(1)(C)(ii); see also supra Section III.A.1.b. (Required Contents of an Expungement Request).

44 See Rule 12800(d)(2). The request must also meet the same requirements as an on-behalf-of request filed under Rule 12805(a)(2). See Rules 12805(a)(1)(C)(ii), 12805(a)(2)(C)(ii) and 12805(a)(2)(D); see also supra Section III.A.1.b. (Required Contents of an Expungement Request).

45 See Rule 12800(e)(1).

46 See Rule 12800(c).

47 See Rule 12800(d)(1)(C).

48 See Rule 12800(e)(1)(A).

49 See Rule 12800(e)(1)(A). The arbitrator must conduct the expungement hearing pursuant to Rule 12805(c). The expungement award must meet the requirements of Rule 12805(c)(8), and the DRS arbitration forum fees will be assessed pursuant to Rule 12805(c)(9).

50 See Rule 12800(e)(1)(B)(i).

51 See Rule 12800(e)(1)(B)(ii).

52 See Rule 13805(a)(1). An associated person is prohibited from filing a straight-in request for expungement of customer dispute information against a customer as a new claim that is separate from the customer arbitration. See Rule 12805(a)(3).

53 See Rule 13203(b); see also Proposing Release, supra note 9 at 50179.

54 See Rule 13805(a)(4).

55 See Rule 13805(a)(3); see also supra Section III.A.1.b. (Required Contents of an Expungement Request).

56 A “final regulatory action” includes any final action, including any action that is on appeal, by a securities regulator or SRO. See Rule 8312(c); see also Regulatory Notice 09-66 (November 2009) (noting that “actions that are delineated in current Form U4 Questions 14C, 14D or 14E will be considered ‘final regulatory actions.’ Similarly, actions that are detailed in current Form U5 Question 7D, and have a status of ‘final’ or ‘on appeal,’ will be considered ‘final regulatory actions’ as such actions are also addressed in Form U4.”). For example, a Letter of Acceptance, Waiver, and Consent and an accepted Offer of Settlement are two examples, among others, of final regulatory actions taken by FINRA. See Rule 9216(a)(4) and Rule 9270(g). A “final regulatory action” may also include a final action reported by a regulator on Form U6. See Regulatory Notice 09-66 (November 2009). For purposes of Rule 13805, a “final regulatory action” does not include a final action by a securities regulator or SRO that is dismissed, vacated or withdrawn.

57 See Rule 13805(a)(2).

58 See Rule 13805(a)(2)(A)(vi).

59 See Rule 13805(a)(2)(A)(vii).

60 See Rule 13805(a)(2)(B)(i).

61 See Rule 13805(a)(2)(B)(ii).

62 See Rules 12203(a) and 13203(a); see also Rules 12206(a) and 13206(a). The issue of eligibility may be raised in a motion by the parties or sua sponte by the arbitrators. See Horst v. FINRA, slip op., No. A-18-777960-C (Nev. Dist. Ct. Oct. 25, 2018) (Order Denying Motion to Vacate Arbitration Award). In addition, Rules 12409 and 13413 provide that the arbitrators have the authority to interpret and determine the applicability of all provisions under the Codes. Thus, the decision of whether to dismiss a claim pursuant to this six-year eligibility rule is within the sole discretion of the panel. See Howsam v. Dean Witter Reynolds, 537 U.S. 79, 85-86 (2002) (finding that an arbitrator properly decides issues of eligibility). Such interpretations and decisions are final and binding upon the parties.

63 See Rule 13805(a)(4).

64 Among other requirements, public arbitrators are not employed in the securities industry and do not devote 20 percent or more of their professional work to the securities industry or to parties in disputes concerning investment accounts or transactions or employment relationships within the financial industry. See Rules 12100(aa) and 13100(x).

65 See Rule 13806(b). Arbitrators are eligible for the chairperson roster if they have completed chairperson training provided by FINRA and: (1) have a law degree and are a member of a bar of at least one jurisdiction and have served as an arbitrator through award on at least one arbitration administered by an SRO in which hearings were held; or (2) have served as an arbitrator through award on at least three arbitrations administered by an SRO in which hearings were held. Public arbitrators who are eligible for the chairperson roster would include those arbitrators who have met the chairperson eligibility requirements of Rules 12400(c) or 13400(c), regardless of whether they have already served as a chair on an arbitration case.

66 See Rule 13806(b)(2)(A); see also supra note 39.

67 See Rule 13806(b)(2)(B). This requirement will not be satisfied by serving on arbitrations administered under the special proceeding option of the simplified arbitration rules. See Rule 12800(c)(3)(B).

68 FINRA uses a list selection algorithm that generates, on a random basis, lists of arbitrators from FINRA's rosters of arbitrators. See Rule 13400(a); see also Rule 12400(a).

69 See Rule 13806(b)(1). The first arbitrator selected will be the chair of the panel.

70 See Rule 13806(b)(5). The parties also are not permitted to stipulate to the use of pre-selected arbitrators (i.e., arbitrators that the parties find on their own to use in their cases). See Rule 13806(b)(1).

71 See Rule 13806(b)(4). Specifically, the Codes provide that before the first hearing session begins, the Director may remove an arbitrator for conflict of interest or bias, either upon request of a party or on the Director's own initiative. See Rule 13410(a).

72 See Rule 13806(b)(4).

73 See Rules 12805(c)(1) and 13805(c)(1).

74 See Rules 12805(c)(2) and 13805(c)(2). The panel will determine the method of appearance for the associated person. In addition, when a party files an on-behalf-of request during a customer arbitration, the requesting party or the party’s representative is also required to appear in person or by video conference at the hearing, as determined by the panel. See Rule 12805(c)(2).

75 See Rules 12805(c)(3)(A), 12805(c)(4), 12800(f)(2), 13805(c)(3)(A) and 13805(c)(4). Customers can choose to attend and participate by telephone, in person or by video conference. Customers also have the option to provide their position on the expungement request in writing. In addition, all customers whose customer arbitrations, civil litigations or customer complaints are a subject of the expungement request are entitled to attend and participate in all aspects of any prehearing conferences held for straight-in requests. See Rule 13805(c)(3). For a list of ways in which customers can attend and participate in expungement hearings, see Rules 12805(c)(5)(A)-(D) and 13805(c)(5)(A)-(D).

76 See Rules 12805(c)(6) and 13805(c)(7). FINRA also continues to encourage arbitrators to request a current copy of the associated person’s BrokerCheck report, paying particular attention to the “Disclosure Events” section of the report. It is an essential part of the arbitrator’s role when determining whether expungement is appropriate to consider the expungement request in the context of the associated person’s entire securities industry record. An associated person’s securities industry record may include disclosure events related to regulatory actions, investigations, criminal matters, and any other registration information that might be relevant to the expungement request.

77 See Rules 12805(c)(7) and 13805(c)(8). The panel must review settlement documents that are related to the customer dispute information that is the subject of the expungement request, regardless of whether the associated person was a party to the settlement. The amendments require the panel to inquire and fully consider whether a party conditioned a settlement of a customer’s dispute upon any agreement, written or otherwise, not to oppose the request for expungement in cases in which the customer does not participate in the expungement hearing or the requesting party states that a customer has indicated that the customer will not oppose the expungement request. These types of conditioned settlements violate Rule 2081 and may be grounds to deny an expungement request. See Rules 12805(c)(7), 13805(c)(8) and 2081; see also Prohibited Conditions Relating to Expungement of Customer Dispute Information FAQ.

78 The unanimity requirement does not apply when deciding a customer’s dispute; a majority decision of the arbitrators will continue to be sufficient.

79 See Rules 12805(c)(8)(A)(i) and 13805(c)(9)(A)(i). The three grounds are that (i) the claim, allegation or information is factually impossible or clearly erroneous; (ii) the associated person was not involved in the alleged investment-related sales practice violation, forgery, theft, misappropriation or conversion of funds; or (iii) the claim, allegation or information is false. The amendments provide that the Director shall not serve an award containing expungement relief based on grounds other than those specified in Rules 12805(c)(8)(A)(i) or 13805(c)(9)(A)(i).

80See Rules 12805(c)(8)(B) and 13805(c)(9)(B). The panel’s explanation must be complete and not solely a recitation of one of the Rule 12805(c)(8)(A)(i) or 13805(c)(9)(A)(i) grounds or language provided in the expungement request.

81 See Rules 12805(c)(8)(C) and 13805(c)(9)(C).

82 See Rules 12805(c)(9) and 13805(c)(10).

83 See Rule 13805(b)(1)(A)(ii). The panel is authorized to decide whether extraordinary circumstances exist that make service on the customers impracticable. See Rule 13805(b)(1)(A)(i).

84 See Rule 13805(b)(1)(B)(i).

85 See Rule 13307(a)(7).

86 See Rule 13805(b)(1)(A)(iv).

87 See Rule 13805(b)(1)(B)(i). Notice to customers is not necessary for requests filed under Rules 12800 or 12805 of the Customer Code as the customer will be a named party. However, the Director will notify all customers from a simplified customer arbitration of a separate expungement-only hearing. The Director’s notice serves as a reminder of the expungement request and provides the customers with timely notice of the expungement hearing so that the customers and their representatives may plan to attend and participate if they choose. See Rule 12800(f)(2).

88 See Rule 13805(b)(1)(B)(ii). DRS will provide customers with access to the documents through the DR Portal. See FINRA DRS, DR Portal.

89 See Rules 12800(f)(1), 12805(b) and 13805(b)(2)(A).

90 See Rule 13805(c)(6)(A).

91 See Rule 13805(b)(2)(B). The state securities regulators’ access to the documents will be subject to confidentiality restrictions. Outside of the process provided in the rules for straight-in requests, state securities regulators can continue to seek access to documents filed in the DRS arbitration forum pursuant to their separate authority.

92 See Rule 13805(b)(3).

93 See Rule 13805(c)(6)(B).

94 See Rule 13805(c)(6)(C). The authorized representative will not be considered a party to the proceeding and their attendance and participation is limited to what is authorized by Rule 13805(c)(6). As such, an authorized representative is not entitled to seek discovery from the parties through the DRS arbitration forum, file motions, or seek to postpone a hearing. In addition, the panel may not allow the attendance or participation of the authorized representative to materially delay the scheduling of the expungement hearing.

95 See Rules 12203(b) and 13203(b).

96 See Rules 12203(c) and 13203(c).

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ATTACHMENT A
New language is underlined; deletions are in brackets.

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12000. CODE OF ARBITRATION PROCEDURE FOR CUSTOMER DISPUTES

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12100. Definitions
Unless otherwise defined in the Code, terms used in the Code and interpretive material, if defined in the FINRA By-Laws, shall have the meaning as defined in the FINRA By-Laws. (a) through (w) No Change. (x) Pleadings A pleading is a statement describing a party's causes of action or defenses. Documents that are considered pleadings are: a statement of claim, an answer, a counterclaim, a cross claim, a third party claim, a separate document requesting expungement, and any replies. (y) through (ee) No Change. (ff) Unnamed Person For purposes of Rule 12800 and Rule 12805, the term “unnamed person” means an associated person, including a formerly associated person, who is identified in a Form U4, Form U5, or Form U6 as having been the subject of an investment-related, customer￾initiated arbitration that alleged that the associated person or formerly associated person was involved in one or more sales practice violations, but who is not named as a respondent in the arbitration.

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12203. Denial of FINRA Forum
(a) No Change.
(b) The Director shall decline the use of the FINRA arbitration forum if the Director determines that the expungement request is ineligible for arbitration under Rule 12805. (c) The Director may decline the use of the FINRA arbitration forum if the Director determines that the expungement request was not filed under, or considered in the arbitration forum in accordance with, Rule 12805. (b) Disputes that arise out of transactions in a readily identifiable market may be referred to the arbitration forum for that market, if the claimant agrees.

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12307. Deficient Claims
(a) The Director will not serve any claim that is deficient. The reasons a claim may be deficient include the following:
(1) through (5) No Change.
(6) The claimant did not pay all required filing fees, unless the Director deferred the fees; [or] (7) The claim does not comply with the restrictions on filings with personal confidential information under Rule 12300(d)(1); (8) A request to expunge customer dispute information from the CRD system does not include the CRD number of the party requesting expungement;

(9) A request to expunge customer dispute information from the CRD system does not include the CRD occurrence number that is the subject of the request; (10) A request to expunge customer dispute information from the CRD system does not include the case name and docket number of the arbitration that is associated with the customer dispute information; or (11) A request to expunge customer dispute information from the CRD system does not include an explanation of whether expungement of the same customer dispute information was (i) previously requested and, if so (ii) how it was decided. (b) through (c) No Change.

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12604. Evidence
(a) through (b) No Change.
(c) Notwithstanding paragraph (a) of this Rule, a prior expungement award shall not be admissible.

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PART VIII SIMPLIFIED ARBITRATION, [AND] DEFAULT PROCEEDINGS,
AND EXPUNGEMENT PROCEEDINGS

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12800. Simplified Arbitration
(a) No Change.
(b) Single Arbitrator

All arbitrations administered under this [r]Rule will be decided by a single public arbitrator appointed from the FINRA chairperson roster in accordance with the list selection algorithm, unless the parties agree in writing otherwise. An arbitrator must evidence successful completion of, and agreement with, enhanced expungement training provided by FINRA Dispute Resolution Services prior to considering a request to expunge customer dispute information in an arbitration administered under this Rule. (c) No Change. (d) Requests to Expunge Customer Dispute Information (1) When an Associated Person is Named as a Respondent (A) An associated person named as a respondent in a simplified investment-related, customer-initiated arbitration may request expungement during the arbitration of the customer dispute information associated with the customer’s statement of claim, provided the request is not barred pursuant to Rule 12805(a)(1)(B). (B) If an associated person named as a respondent requests expungement during the simplified investment-related, customer-initiated arbitration:
(i) the request must be filed in the answer or a separate pleading requesting expungement and meet the requirements of Rule 12805(a)(1)(C)(ii). If the associated person requests expungement in a pleading other than an answer, the request must be filed within 30 days after the date FINRA notifies the associated person of the appointment of the arbitrator; and

(ii) the arbitrator from the simplified arbitration shall consider and decide the expungement request in accordance with Rule 12805(c). (C) If the associated person named as a respondent withdraws or does not pursue an expungement request after filing the request during the simplified investment-related, customer-initiated arbitration, the arbitrator shall deny the expungement request with prejudice. (2) On Behalf of an Unnamed Person (A) A party to a simplified investment-related, customer-initiated arbitration may request expungement on behalf of an unnamed person during the arbitration of the customer dispute information associated with the customer’s statement of claim with the written consent of the unnamed person, provided the request is not barred pursuant to Rule 12805(a)(1)(B). (B) If a party requests expungement on behalf of an unnamed person during a simplified investment-related, customer-initiated arbitration:
(i) the request must be filed: (a) in compliance with Rules 12805(a)(1)(C)(ii), 12805(a)(2)(C)(ii), and 12805(a)(2)(D); and (b) within 30 days after the date FINRA notifies the parties of the appointment of the arbitrator; and

(ii) the arbitrator from the simplified arbitration shall consider and decide the expungement request in accordance with Rule 12805(c). (C) If the requesting party withdraws or does not pursue an expungement request after filing the request during a simplified investment-related, customer-initiated arbitration, the arbitrator shall deny the expungement request with prejudice. (D) If a party to the simplified investment-related, customer￾initiated arbitration does not request expungement on behalf of the unnamed person, the unnamed person shall not file a motion to intervene in the simplified arbitration to request expungement of customer dispute information associated with the customer’s statement of claim. (e) Deciding Expungement Requests (1) If an associated person named as a respondent, or a party on behalf of an unnamed person, requests expungement during a simplified investment-related, customer-initiated arbitration, the expungement request shall be decided by the arbitrator from the simplified arbitration, as follows:
(A) No Hearing or Option Two Special Proceeding. If a customer requests no hearing pursuant to Rule 12800(c)(2), or an Option Two special proceeding pursuant to Rule 12800(c)(3)(B), the arbitrator shall hold a separate expungement hearing pursuant to Rule 12805(c) to consider and decide the expungement request and issue the decision on the

expungement request in a separate, subsequent award in accordance with Rule 12805(c)(8).
(B) Option One Hearing. If a customer requests an Option One hearing pursuant to Rule 12800(c)(3)(A), the arbitrator shall consider and decide the expungement request, as follows:
(i) If the simplified arbitration closes by award after a hearing, the arbitrator shall consider and decide the expungement request during the Option One hearing in accordance with Rule 12805(c), and issue the decision on the expungement request in the same award in accordance with Rule 12805(c)(8). (ii) If the simplified arbitration closes other than by award or by award without a hearing, the arbitrator shall hold a separate expungement hearing, pursuant to Rule 12805(c), to consider and decide the expungement request. At the conclusion of the expungement hearing, the arbitrator shall issue a separate award in accordance with Rule 12805(c)(8). (2) If an associated person named as a respondent, or a party on behalf of an unnamed person, does not request expungement of the customer dispute information associated with the customer’s statement of claim during the simplified investment-related, customer-initiated arbitration, the associated person may request expungement pursuant to Rule 13805 after the simplified arbitration has closed, provided that the request is not barred by Rule 13805(a)(2).

(f) Notifications
(1) Notification to State Securities Regulators The Director shall notify state securities regulators, in the manner determined by the Director in collaboration with state securities regulators, of an expungement request within 15 days of receiving an expungement request that includes all the elements described in Rule 12805(a)(1)(C)(ii). (2) Notification to Customers The Director shall notify all customers from the simplified arbitration of an expungement hearing conducted pursuant to Rule 12800(e)(1) or Rule 13805, and the customers shall be permitted to attend and participate in the hearing in accordance with Rule 12805(c) or Rule 13805(c), as applicable. (d) Discovery and Additional Evidence No Change. (e) Increases in Amount in Dispute No Change. (f) Arbitrator Honoraria No Change.

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12805. Expungement of Customer Dispute Information from the Central
       Registration Depository (CRD) System[under Rule 2080] This Rule applies to all requests to expunge customer dispute information from the CRD system, except that when a party requests expungement of customer dispute information during a simplified arbitration pursuant to Rule 12800(d), only those sections

of this Rule that are specifically referenced in Rule 12800(d) through (f) shall apply.
Except as otherwise provided in this Rule, all other provisions of the Code apply to such expungement requests. (a) Requesting Expungement Under the Customer Code (1) Requesting Expungement When Named as a Respondent (A) Applicability An associated person named as a respondent in an investment￾related, customer-initiated arbitration may request expungement during the arbitration of the customer dispute information associated with the customer’s statement of claim, unless barred by Rule 12805(a)(1)(B). If the associated person does not request expungement in the arbitration, the associated person shall be prohibited from seeking to expunge the customer dispute information associated with the customer’s statement of claim in any subsequent proceeding. (B) Limitations An associated person shall not file a request for expungement of customer dispute information if:
(i) a panel held a hearing to consider the merits of the associated person’s request for expungement of the same customer dispute information; or (ii) a court of competent jurisdiction previously denied the associated person’s request to expunge the same customer dispute information.

(C) Expungement Request
(i) An associated person must include the expungement request in the 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. (ii) The expungement request must include:
a. the applicable filing fee; b. the CRD number of the party requesting expungement;
c. each CRD occurrence number that is the subject
of the request; d. the case name and docket number associated with the customer dispute information; and e. an explanation of whether expungement of the same customer dispute information was (i) previously requested and, if so (ii) how it was decided. (D) Panel Decides Expungement Request (i) During Investment-Related, Customer-Initiated Arbitration

If an associated person requests expungement pursuant to Rule 12805(a)(1)(C) and the investment-related, customer-initiated arbitration closes by award after a hearing, the panel shall consider and decide the expungement request during the arbitration in accordance with Rule 12805(c), and issue its decision on the expungement request in the same award in accordance with Rule 12805(c)(8). If the associated person withdraws or does not pursue the expungement request, the panel shall deny the expungement request with prejudice. (ii) Investment-Related, Customer-Initiated Arbitration Closes Other Than by Award or by Award Without a Hearing If an associated person requests expungement pursuant to Rule 12805(a)(1)(C) and the investment-related, customer-initiated arbitration closes other than by award or by award without a hearing:
a. the panel shall not consider the associated person’s request for expungement of customer dispute information; and b. the associated person may file a request for expungement of the customer dispute information as a new claim under Rule 13805(a) against the member firm at which the person was associated at the time the customer

dispute arose, provided the expungement request is not barred pursuant to Rule 13805(a)(2).
(2) Requesting Expungement on Behalf of an Unnamed Person (A) Applicability With the written consent of the unnamed person, a party to an investment-related, customer-initiated arbitration may request expungement on behalf of the unnamed person during the arbitration of the customer dispute information associated with the customer’s statement of claim. (B) Limitations A party to an investment-related, customer-initiated arbitration shall not request expungement on behalf of an unnamed person if the request is barred pursuant to Rule 12805(a)(1)(B). (C) Expungement Request (i) A party requesting expungement on behalf of an unnamed person must file the request with the Director in accordance with Rule 12805(a)(1)(C)(ii). (ii) The request must include the Form Requesting Expungement on Behalf of an Unnamed Person, signed by the unnamed person and the party that is seeking expungement of customer dispute information on the unnamed person’s behalf. (iii) The request must be filed as soon as practicable, but no later than 60 days before the first scheduled hearing; otherwise,

the requesting party must file a motion pursuant to Rule 12503 requesting an extension to file the expungement request. (D) Form Requesting Expungement on Behalf of an Unnamed Person (i) By signing the Form Requesting Expungement on Behalf of an Unnamed Person, the unnamed person agrees that the person shall be bound by the panel’s decision on the expungement request. (ii) By signing the Form Requesting Expungement on Behalf of an Unnamed Person, the unnamed person agrees to maintain the confidentiality of any documents and information from the investment-related, customer-initiated arbitration to which the unnamed person is given access and to adhere to any confidentiality agreements or orders associated with the arbitration. (iii) By filing and serving an expungement request, the requesting party agrees to represent the unnamed person and the unnamed person’s interests and to pursue the request for expungement on behalf of the unnamed person during the investment-related, customer-initiated arbitration.

(E) Deciding Expungement Request
(i) Investment-Related, Customer-Initiated Arbitration Closes by Award After a Hearing If the investment-related, customer-initiated arbitration closes by award after a hearing, the panel shall consider and decide the expungement request during the arbitration in accordance with Rule 12805(c), and issue its decision on the expungement request in the same award in accordance with Rule 12805(c)(8). If the requesting party withdraws or does not pursue the expungement request, the panel shall deny the expungement request with prejudice. (ii) Investment-Related, Customer-Initiated Arbitration Closes Other than by Award or by Award Without a Hearing If the investment-related, customer-initiated arbitration closes other than by award or by award without a hearing:
a. the panel shall not consider the party’s request for expungement of customer dispute information on behalf of the unnamed person; and b. the unnamed person may file a request for expungement of the customer dispute information as a new claim under Rule 13805(a) against the member firm at which the person was associated at the time the customer

dispute arose, provided the expungement request is not barred pursuant to Rule 13805(a)(2).
(iii) Unnamed Person May Not Intervene in the
Investment-Related, Customer-Initiated Arbitration a. If a party to the investment-related, customer￾initiated arbitration does not request expungement on behalf of the unnamed person, the unnamed person shall not file a motion to intervene in the arbitration to request expungement of customer dispute information associated with the customer’s statement of claim. b. The unnamed person may file a request for expungement of the customer dispute information as a new claim under Rule 13805(a) against the member firm at which the person was associated at the time the customer dispute arose, provided the filing of the request is not barred pursuant to Rule 13805(a)(2). (3) No Separate Requests For Expungement Filed Against a Customer An associated person shall not file a request for expungement of the customer dispute information as a new claim against a customer separate from the investment-related, customer-initiated arbitration.

(b) Notification to State Securities Regulators The Director shall notify state securities regulators, in the manner determined by the Director in collaboration with state securities regulators, of an expungement request within 15 days of receiving an expungement request that includes all the elements described in Rule 12805(a)(1)(C)(ii). (c) Expungement Hearing In order to issue an award containing [grant] expungement of customer dispute information [under Rule 2080], the panel must comply with the following requirements[:]. (1) Recorded Hearing Sessions [(a)]The panel must [H]hold one or more separate [a]recorded hearing sessions[(by telephone or in person)] regarding the [appropriateness of]expungement request. [This paragraph will apply to cases administered under Rule 12800 even if a customer did not request a hearing on the merits.] (2) Appearance by Associated Person and Party Requesting Expungement The associated person whose information in the CRD system is the subject of the request to expunge customer dispute information must appear in person or by video conference at the expungement hearing. A party requesting expungement on behalf of an unnamed person or the party’s representative must also appear in person or by video conference at the expungement hearing. The panel shall decide the method of appearance.

(3) Customer’s Attendance and Participation
(A) Entitled to Attend and Participate
All customers whose investment-related, customer-initiated arbitrations, civil litigations, or customer complaints are a subject of the expungement request are entitled to attend and participate in all aspects of the expungement hearing. The customer may provide the customer’s position on the expungement request in writing. (B) Method of Attendance and Participation All customers whose investment-related, customer-initiated arbitrations, civil litigations, or customer complaints are a subject of the expungement request may attend and participate in the expungement hearing by telephone, in person, or by video conference. (4) Customer Representation All customers whose investment-related, customer-initiated arbitrations, civil litigations, or customer complaints are a subject of the expungement request are entitled to representation at the expungement hearing pursuant to Rule 12208. (5) Customer and Customer’s Representative Participation during the Expungement Hearing (A) Customer Introduces Evidence The panel must allow the customer or customer’s representative to introduce evidence during the expungement hearing. If the customer or

customer’s representative introduces evidence during the expungement hearing, a party may state objections to the introduction of the evidence. (B) Customer’s Testimony The panel must allow the customer and witnesses called by the customer or the customer’s representative to testify at the expungement hearing and be questioned by the customer or customer’s representative. If a customer or witnesses called by the customer or customer’s representative testify during the expungement hearing, the associated person or party requesting expungement on behalf of an unnamed person may cross-examine them. (C) Associated Person’s or Others’ Testimony and Evidence The panel must allow the customer or the customer’s representative to state objections to evidence presented during the expungement hearing. The panel must also allow the customer or the customer’s representative to cross-examine the associated person, the party requesting expungement on behalf of an unnamed person and any other witnesses called during the expungement hearing. (D) Opening and Closing Arguments by Customer or Customer’s Representative The panel must allow the customer or the customer’s representative to present opening and closing arguments if the panel allows any party to present such arguments.

(6) Panel Requests Additional Documents or Evidence The panel may request from the associated person, or party requesting expungement on behalf of an unnamed person, any documentary, testimonial or other evidence that it deems relevant to the expungement request. (7) Review Settlement Documents [(b) In cases involving settlements,]The panel shall review any settlement documents related to customer dispute information that is the subject of the expungement request and consider the amount of payments made to any party and any other terms and conditions of [a]the settlement. In addition, the panel shall inquire and fully consider whether a party conditioned a settlement of the arbitration upon any agreement, written or otherwise, not to oppose the request for expungement in cases in which the customer does not participate in the expungement hearing or the requesting party states that a customer has indicated that the customer will not oppose the expungement request. (8) Award (c) Unanimous Decision Required to Issue Award Containing Expungement Relief (i) In order to issue an award containing expungement relief, the panel must find unanimously that one or more of the following grounds for expungement has been established:
a. the claim, allegation or information is factually impossible or clearly erroneous;

b. the registered person was not involved in the alleged investment-related sales practice violation, forgery, theft, misappropriation or conversion of funds; or
c. the claim, allegation or information is false.
(ii) The panel shall not issue, and the Director shall not serve, an award containing expungement relief based on grounds other than those specified in paragraph (c)(8)(A)(i) of this Rule. (B) Required Contents of Award Containing Expungement Relief The panel must [I]indicate in the arbitration award which of the [Rule 2080]grounds for expungement identified in paragraph (c)(8)(A)(i) of this Rule serve(s) as the basis for its expungement order, [and]provide a [brief]written explanation of the reason(s) for its finding that one or more of [Rule 2080]those grounds [for expungement applies]apply to the facts of the [case]request, and identify any specific documentary, testimonial or other evidence on which the panel relied in awarding expungement relief. (C) Evidentiary Weight of Customer’s Decision Not to Attend or Participate The panel shall not give any evidentiary weight to a customer’s decision not to attend or participate in an expungement hearing when making a determination of whether expungement is appropriate.

(9) Forum Fees
[(d)]The panel must [A]assess all forum fees for hearing sessions in which the sole topic is the determination of the appropriateness of expungement against the party or parties requesting expungement[relief].

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13000. CODE OF ARBITRATION PROCEDURE FOR INDUSTRY DISPUTES

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13100. Definitions
Unless otherwise defined in the Code, terms used in the Code and interpretive material, if defined in the FINRA By-Laws, shall have the meaning as defined in the FINRA By-Laws. (a) through (u) No Change. (v) Pleadings A pleading is a statement describing a party's causes of action or defenses. Documents that are considered pleadings are: a statement of claim, an answer, a counterclaim, a cross claim, a third party claim, a separate document requesting expungement and any replies. (w) through (gg) No Change.

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13203. Denial of FINRA Forum
(a) No Change.

(b) The Director shall decline the use of the FINRA arbitration forum if the Director determines that the expungement request is ineligible for arbitration under Rule 13805. (c) The Director may decline the use of the FINRA arbitration forum if the Director determines that the expungement request was not filed or considered in the arbitration forum in accordance with Rule 13805. (b) Disputes that arise out of transactions in a readily identifiable market may be referred to the arbitration forum for that market, if the claimant agrees.

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13214. Payment of Arbitrators
       (a) Except as provided in paragraph (b) of this Rule, Rule 13800, and Rule [13806]13807(f), FINRA will pay the panel an honorarium, as follows:
       (1) through (6) No Change.
       (b) No Change.
       (c) Payment for Deciding Discovery-Related Motions, Contested Subpoena Requests, and Contested Orders for Production or Appearance without a Hearing Session (1) FINRA will pay each arbitrator an honorarium of $200 to decide without a hearing session: (i) a discovery-related motion, (ii) a motion that contains one or more contested subpoena requests or contested orders for production or appearance; or (iii) a motion that contains one or more contested subpoena requests and contested orders for production or appearance. This paragraph does not apply to cases administered under Rule 13800 or pursuant to Rule [13806]13807(d)(1).

(2) through (3) No Change.
(d) No Change.

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13307. Deficient Claims
       (a) The Director will not serve any claim that is deficient. The reasons a claim may be deficient include the following:
       (1) through (4) No Change.
       (5) The claimant did not pay all required filing fees, unless the Director deferred the fees; [or] (6) The claim does not comply with the restrictions on filings with personal confidential information under Rule 13300(d)(1); (7) A request to expunge customer dispute information from the CRD system does not include a customer’s current address; (8) A request to expunge customer dispute information from the CRD system does not include the CRD number of the party requesting expungement; (9) A request to expunge customer dispute information from the CRD system does not include each CRD occurrence number that is the subject of the request; (10) A request to expunge customer dispute information from the CRD system does not include the case name and docket number of the arbitration associated with the customer dispute information, if applicable; or (11) A request to expunge customer dispute information from the CRD system does not include an explanation of whether expungement of the same

customer dispute information was (i) previously requested and, if so (ii) how it was decided. (b) through (c) No Change.

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13600. Required Hearings
(a) Hearings will be held, unless:
(1) The arbitration is administered under Rule 13800(c), Rule 13801, or Rule [13806]13807(e)(1); (2) through (3) No Change. (b) through (c) No Change.

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13604. Evidence
(a) through (b) No Change.
(c) Notwithstanding paragraph (a) of this Rule, a prior expungement award shall not be admissible.

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PART VIII SIMPLIFIED ARBITRATION; DEFAULT PROCEEDINGS;
SEXUAL ASSAULT CLAIMS, SEXUAL HARASSMENT CLAIMS, OR STATUTORY EMPLOYMENT DISCRIMINATION CLAIMS; [AND] INJUNCTIVE RELIEF; EXPUNGEMENT PROCEEDINGS; AND PROMISSORY NOTE PROCEEDINGS

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13805. Expungement of Customer Dispute Information from the Central
Registration Depository (CRD) System[under Rule 2080] This Rule applies to all requests to expunge customer dispute information from the CRD system. Except as otherwise provided in this Rule, all provisions of the Code apply to such expungement requests. (a) Filing an Expungement Request against a Member Firm (1) Applicability An associated person may request expungement of customer dispute information from the CRD system by filing a statement of claim under Rule 13302 against a member firm at which the person was associated at the time the customer dispute arose, unless barred by Rule 13805(a)(2). (2) Limitations (A) An associated person shall not file a claim requesting expungement of customer dispute information from the CRD system against the member firm at which the person was associated at the time the customer dispute arose if:
(i) a panel held a hearing to consider the merits of a request for expungement of the same customer dispute information; (ii) a court of competent jurisdiction previously denied a request to expunge the same customer dispute information;

(iii) the investment-related, customer-initiated arbitration, civil litigation or customer complaint associated with the customer dispute information has not closed; (iv) a panel or court of competent jurisdiction previously found the associated person liable in a customer arbitration or civil litigation associated with the same customer dispute information; (v) the customer dispute information involves the same conduct that is the basis of a final regulatory action taken by a securities regulator or self-regulatory organization; (vi) more than two years have elapsed since the investment-related, customer-initiated arbitration or civil litigation associated with the customer dispute information has closed; (vii) there was no investment-related, customer-initiated arbitration or civil litigation associated with the customer dispute information, and more than three years have elapsed since the date that the customer complaint was initially reported to the CRD system; or (viii) the associated person is prohibited from seeking to expunge the customer dispute information under Rule 12805(a)(1)(A). (B) Subject to the six-year eligibility requirement of Rule 13206(a), an associated person is not barred from requesting expungement of customer dispute information pursuant to Rule 13805(a)(2) if:

(i) the request for expungement is made pursuant to Rule 13805 within two years of October 16, 2023, and the disclosure sought to be expunged is associated with an investment-related, customer-initiated arbitration or civil litigation that closed on or prior to October 16, 2023; or, (ii) the request for expungement is made pursuant to Rule 13805 within three years of October 16, 2023, and the disclosure sought to be expunged is associated with a customer complaint initially reported to the CRD system on or prior to October 16, 2023. (3) Expungement Request The expungement request must be filed with the Director, pursuant to Rule 13302, and include:
(A) the applicable filing fee;
(B) the CRD number of the party requesting expungement; (C) each CRD occurrence number that is the subject of the request; (D) the case name and docket number associated with the customer dispute information, if applicable; and (E) an explanation of whether expungement of the same customer dispute information was (i) previously requested and, if so (ii) how it was decided. (4) Panel Decides Expungement Request

A three-person panel selected pursuant to Rule 13806 must hold an expungement hearing, pursuant to Rule 13805(c), to consider and decide the expungement request. At the conclusion of the expungement hearing, the panel must issue an award in accordance with Rule 13805(c)(9). If the associated person withdraws or does not pursue the expungement request, the panel shall deny the expungement request with prejudice. (b) Notifications (1) To Customers (A) The associated person shall:
(i) serve all customers whose investment-related, customer-initiated arbitrations, civil litigations, or customer complaints are a subject of the expungement request with a copy of the statement of claim within 10 days of filing the statement of claim with the Director, unless the panel determines that extraordinary circumstances make such service impracticable; (ii) serve all customers whose investment-related, customer-initiated arbitrations, civil litigations, or customer complaints are a subject of the expungement request with a copy of any answer within 10 days of the filing of each answer with the Director, unless the panel determines that extraordinary circumstances make such service impracticable; (iii) serve the customers by first-class mail, overnight mail service, overnight delivery service, or hand delivery; and

(iv) file with the panel proof of service for the statement of claim and any answers, copies of all documents provided by the associated person to the customers, and copies of all communications sent to the customers and responses received by the associated person from the customers. (B) The Director shall:
(i) notify all customers whose investment-related, customer-initiated arbitrations, civil litigations, or customer complaints are a subject of the expungement request of the time, date and place of any prehearing conferences and the expungement hearing using the customers’ current addresses provided by the party seeking expungement; and (ii) provide the notified customers with access to all documents relevant to the expungement request that are filed in (a) the arbitration requesting expungement relief and (b) a customer￾initiated arbitration brought by the customer under the Customer Code that is a subject of the expungement request. (2) To State Securities Regulators (A) The Director shall notify state securities regulators, in the manner determined by the Director in collaboration with state securities regulators, of an expungement request within 15 days of receiving an expungement request that includes all the elements described in Rule 13805(a)(3).

(B) The Director shall provide state securities regulators with access, subject to confidentiality restrictions, to all documents relevant to the expungement request that are filed in (i) the arbitration requesting expungement relief and (ii) any other customer-initiated arbitration brought under the Customer Code that is associated with the customer dispute information that is a subject of the expungement request. (3) Notification of Participation by State Securities Regulators If an authorized representative of the notified state securities regulators notifies the Director no later than 30 days after the last answer is due under the Code that the authorized representative intends to attend and participate in the expungement hearing (i) the Director shall notify the authorized representative of the time, date and place of any prehearing conferences and the expungement hearing and (ii) the panel shall allow the authorized representative to attend and participate in the prehearing conferences and the expungement hearing in accordance with the requirements of Rule 13805(c)(6). (c) Expungement Hearing In order to [grant]issue an award containing expungement of customer dispute information [under Rule 2080], the panel must comply with the following requirements[:]. (1) Recorded Hearing Sessions [(a)]The panel must [H]hold one or more [a]recorded hearing sessions[(by telephone or in person)] regarding the [appropriateness of]expungement request.

[This paragraph will apply to cases administered under Rule 13800 even if a claimant did not request a hearing on the merits.] (2) Appearance by Associated Person The associated person whose information in the CRD system is the subject of the request to expunge customer dispute information must appear in person or by video conference at the expungement hearing. The panel shall decide the method of appearance. (3) Customer’s Attendance and Participation (A) Entitled to Attend and Participate All customers whose investment-related, customer-initiated arbitrations, civil litigations, or customer complaints are a subject of the expungement request are entitled to attend and participate in all aspects of the prehearing conferences and expungement hearing. The customer may provide the customer’s position on the expungement request in writing. (B) Method of Attendance and Participation All customers whose investment-related, customer-initiated arbitrations, civil litigations, or customer complaints are a subject of the expungement request may attend and participate at the expungement hearing by telephone, in person, or by video conference. (4) Customer Representation All customers whose investment-related, customer-initiated arbitrations, civil litigations, or customer complaints are a subject of the expungement request

are entitled to representation at the prehearing conferences and expungement hearing pursuant to Rule 13208. (5) Customer and Customer’s Representative Participation during the Expungement Hearing (A) Customer Introduces Evidence The panel must allow the customer or the customer’s representative to introduce evidence during the expungement hearing. If the customer or the customer’s representative introduces evidence during the expungement hearing, a party may state objections to the introduction of the evidence. (B) Customer’s Testimony The panel must allow the customer and witnesses called by the customer or the customer’s representative to testify at the expungement hearing and be questioned by the customer or the customer’s representative. If a customer or witnesses called by the customer or the customer’s representative testify during the expungement hearing, the associated person requesting expungement may cross-examine them. (C) Associated Person’s or Others’ Testimony and Evidence The panel must allow the customer or the customer’s representative to state objections to evidence presented during the expungement hearing. The panel must also allow the customer or the customer’s representative to cross-examine the associated person

requesting expungement and any other witnesses called during the expungement hearing.
(D) Opening and Closing Arguments by Customer or Customer’s Representative The panel must allow the customer or the customer’s representative to present opening and closing arguments if the panel allows any party to present such arguments. (6) Attendance and Participation of An Authorized Representative of State Securities Regulators (A) If the required notice has been received by the Director from an authorized representative of the notified state securities regulators pursuant to Rule 13805(b)(3), the authorized representative may attend and participate in the prehearing conferences and the expungement hearing. The authorized representative may (i) provide the position or positions of the notified state securities regulators on the expungement request in writing or (ii) attend and participate at the expungement hearing in person or by video conference. The panel shall not allow the participation of the authorized representative to materially delay the scheduling of the expungement hearing. (B) At the expungement hearing, the authorized representative may (i) introduce documentary, testimonial or other evidence; (ii) cross￾examine any witnesses; and (iii) present opening and closing arguments if the panel allows any party to present such arguments.

(C) The panel must allow any persons participating in the expungement hearing to state objections to evidence presented by the authorized representative during the expungement hearing. The panel must also allow any persons participating in the expungement hearing to cross-examine any witnesses called by the authorized representative during the expungement hearing. (7) Panel Requests Additional Documents or Evidence The panel may request from the associated person requesting expungement, and from the member firm at which the person was associated at the time the customer dispute arose, any documentary, testimonial or other evidence that it deems relevant to the expungement request. (8) Review Settlement Documents [(b) In cases involving settlements,]The panel shall review any settlement documents related to customer dispute information that is the subject of the expungement request and consider the amount of payments made to any party and any other terms and conditions of [a]the settlement. In addition, the panel shall inquire and fully consider whether a party conditioned a settlement of the arbitration upon any agreement, written or otherwise, not to oppose the request for expungement in cases in which the customer does not participate in the expungement hearing or the requesting party states that a customer has indicated that the customer will not oppose the expungement request. (9) Award

(c) Unanimous Decision Required to Issue Award Containing Expungement Relief (i) In order to issue an award containing expungement relief, the panel must find unanimously that one or more of the following grounds for expungement has been established:
a. the claim, allegation or information is factually impossible or clearly erroneous; b. the registered person was not involved in the alleged investment-related sales practice violation, forgery, theft, misappropriation or conversion of funds; or
c. the claim, allegation or information is false.
(ii) The panel shall not issue, and the Director shall not serve, an award containing expungement relief based on grounds other than those specified in paragraph (c)(9)(A)(i) of this Rule. (B) Required Contents of Award Containing Expungement Relief The panel must [I]indicate in the arbitration award which of the [Rule 2080] grounds for expungement identified in paragraph (c)(9)(A)(i) of this Rule serve(s) as the basis for its expungement order, [and]provide a [brief] written explanation of the reason(s) for its finding that one or more [Rule 2080]of those grounds [for expungement applies]apply to the facts of the [case]request, and identify any specific documentary, testimonial or other evidence on which the panel relied in awarding expungement relief.

(C) Evidentiary Weight of Decision of Customer or Authorized Representative Not to Attend or Participate The panel shall not give any evidentiary weight to a decision by a customer or an authorized representative of the state securities regulators not to attend or participate in an expungement hearing when making a determination of whether expungement is appropriate. (10) Forum Fees [(d)]The panel must [A]assess all forum fees for hearing sessions in which the sole topic is the determination of the appropriateness of expungement against the party or parties requesting expungement[relief].
13806. Panel to Decide Requests for Expungement of Customer Dispute
Information Filed by an Associated Person under Rule 13805 (a) Applicability This Rule applies to claims that request expungement of customer dispute information filed by an associated person against a member firm, pursuant to Rule 13805. Except as otherwise provided in this Rule, all provisions of the Code apply to such claims. (b) Selection of Panel (1) The list selection algorithm shall randomly select three public arbitrators who are eligible for the chairperson roster and have the additional qualifications described in Rule 13806(b)(2) to decide a request for expungement of customer dispute information from the CRD system filed by an associated person pursuant to Rule 13805. The parties shall not be permitted to stipulate to the use of pre-selected arbitrators.

(2) Each arbitrator selected for the panel must have fully met the following additional qualifications:
(A) evidenced successful completion of, and agreement with, enhanced expungement training provided by FINRA Dispute Resolution Services; and (B) service as an arbitrator through award on at least four customer-initiated arbitrations administered by FINRA Dispute Resolution Services pursuant to the Rule 12000 Series or another self-regulatory organization, in which a hearing was held, except a hearing pursuant to Rule 12800(c)(3)(B). (3) The first arbitrator selected by the list selection algorithm shall be the chairperson of the panel. (4) The parties requesting expungement of customer dispute information shall not be permitted to strike any arbitrators selected by the list selection algorithm nor stipulate to their removal, but shall be permitted to challenge any arbitrator selected for cause pursuant to Rule 13410. If an arbitrator is removed, the list selection algorithm shall randomly select a replacement. (5) Notwithstanding Rules 13401(b) and (c), the parties shall not be permitted to stipulate to fewer than three arbitrators on the panel to hear the expungement request. [13806]13807. Promissory Note Proceedings No Change.

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ATTACHMENT B
Notice to Arbitrators and Parties on Expanded
Expungement Guidance
Updated September 2017
FINRA adopted FINRA Rules 12805 and 13805 1 to establish procedures that arbitrators must follow before recommending expungement of customer dispute information related to arbitration cases or customer complaints from a broker's Central Registration Depository (CRD ®) record. The procedures are intended to ensure that expungement occurs only when the arbitrators find and document one of the narrow grounds specified in Rule 2080:

• 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; or
• the claim, allegation or information is false.
  Dispute Resolution is publishing the following guidance and reminder for arbitrators when considering expungement requests. Extraordinary Nature of Expungement Relief Expungement is an extraordinary remedy that should be recommended only under appropriate circumstances. Customer dispute information should be expunged only when it has no meaningful investor protection or regulatory value. Once information is expunged from the CRD system, it is permanently deleted and thus The below guidance is relevant for cases filed before October 16, 2023.

no longer available to the investing public, regulators or prospective broker-dealer employers. Role of Arbitrators in Expungement Cases Arbitrators have a unique, distinct role when deciding whether to recommend a request to expunge customer dispute information from a broker's CRD record. In making these determinations, arbitrators should consider the importance of maintaining the integrity of the information in the CRD system. Ensuring that CRD information is accurate and meaningful is essential to investors, who may rely on the information when making decisions about brokers with whom they may conduct business; to regulators, who rely on the information to fulfill their regulatory responsibilities; and to prospective broker-dealer employers, who rely on the information when making hiring decisions. Given this significant role, arbitrators should ensure that they have all of the information necessary to make an informed and appropriate recommendation on expungement. Thus, arbitrators should request any documentary or other evidence they believe is relevant to the expungement request, particularly in cases that settle before an evidentiary hearing or in cases where only the requesting party participates in the expungement hearing. Importance of Allowing Customers and their Counsel to Participate in the Expungement Hearing It is important to allow customers and their counsel to participate in the expungement hearing in settled cases if they wish to. Specifically, arbitrators should:

1. Allow the customer and their counsel to appear at the expungement hearing;

2. Allow the customer to testify (telephonically, in person, or other method) at
   the expungement hearing;

3. Allow counsel for the customer or a pro se customer to introduce documents
   and evidence at the expungement hearing;

4. Allow counsel for the customer or a pro se customer to cross-examine the
   broker and other witnesses called by the party seeking expungement; and

5. Allow counsel for the customer or a pro se customer to present opening and
   closing arguments if the panel allows any party to present such arguments.
   Expungement-Only Cases
   In some instances, an associated person will file an arbitration claim against a member firm solely for the purpose of seeking expungement, without naming the customer in the underlying dispute as a respondent. To ensure that customers know about the expungement request, arbitrators should order the associated persons to provide a copy of their Statement of Claim to the customer(s) involved in the customer’s arbitration case that gave rise to the customer dispute information (underlying arbitration). It is particularly important to note that without this directive from the arbitrators, the customer(s) may not even be aware that an expungement claim is pending regarding their prior dispute. Additionally, notice provides the customer(s) with the opportunity to advise the arbitrators and parties of their position on the expungement request, which may assist arbitrators in making the appropriate finding under Rule 2080. The position of the customer(s) can be made known in writing or through participation in the expungement hearing, as set forth in 1-5 above (or both). BrokerCheck Report Review Arbitrators should ask the broker seeking expungement (or the party seeking expungement on a broker's behalf) to provide a current copy of the BrokerCheck ® report. Arbitrators should carefully review the report when considering whether expungement is appropriate. Arbitrators should pay particular attention to the "Disclosure Events" section of the report. Parties Making Second Requests for Expungement

When an arbitration panel or a court has issued an award or decision denying a broker’s expungement request, the broker may not request expungement in another arbitration case. Therefore, arbitrators should ask a party requesting expungement whether an arbitration panel or a court previously denied expungement of the customer dispute information at issue. If there has been a prior denial, the arbitration panel must deny the expungement request and contact FINRA staff for assistance. Requests for Expungement Prior to the Conclusion of the Underlying Arbitration A broker may not file a request for expungement of customer dispute information arising from an underlying customer arbitration until the underlying customer arbitration has concluded. This means, for example, that if a firm requests expungement on behalf of an unnamed broker during an arbitration filed by a customer, the broker may not file a separate request to expunge the same customer dispute information in a new case while the underlying customer arbitration is ongoing. In another example of a prohibited practice, the broker may not file an expungement request in a separate, expungement-only case while the underlying customer arbitration is ongoing, even if neither the broker nor the firm requests expungement of the customer dispute information in the underlying customer arbitration. FINRA Rules 12203(a) and 13203(a) permit the Director of the Office of Dispute Resolution (Director) only to decline the use of the FINRA arbitration forum if the Director determines that, given the purposes of FINRA and the intent of the Code, the subject matter of the dispute is inappropriate, or that accepting the matter would pose a risk to the health or safety of arbitrators, staff, or parties or their representatives. To ensure that the underlying customer arbitration is resolved before any subsequent request to expunge customer dispute information from the underlying customer arbitration is considered, the Director will deny the forum as to the second expungement-only case. The Director has determined that it would be inappropriate to allow a request for expungement to proceed before the underlying customer arbitration has been resolved because the expungement request would be premature. Denying the forum for the second expungement-only

case will prevent inconsistent results, ensure that the forum operates efficiently, and protect the accuracy of information contained in CRD and disseminated through Brokercheck. 2 Importance of Providing an Explanation for Recommending Expungement FINRA Rules 12805 and 13805 require arbitrators to provide a written explanation of the reasons for finding that one or more of the Rule 2080 grounds for expungement apply to the facts of the case before them. Arbitrators recommending expungement should ensure that the explanation is complete and is not solely a recitation of one of the Rule 2080 grounds or language provided in the expungement request. Specifically, arbitrators should identify in the award the reason(s) for and any specific documentary or other evidence relied on in recommending expungement. Settlement Payments and Prohibited Conditions Relating to Expungement of Customer Dispute Information Arbitrators should consider whether the party seeking expungement contributed to the settlement. In addition, arbitrators should inquire and fully consider whether a party conditioned a settlement of the arbitration upon agreement not to oppose the request for expungement in cases in which the investor does not participate in the expungement hearing or the requesting party states that an investor has indicated that he or she will not oppose the expungement request. Effective July 30, 2014 FINRA Rule 2081 3 prohibits firms and registered representatives from conditioning settlement of a customer dispute on—or otherwise compensating a customer for—the customer's agreement to consent to, or not to oppose, the firm's or representative's request to expunge such information from CRD. Arbitrators who learn of such prohibited conditions should review FINRA’s information relating to Disciplinary Referrals—FINRA.

Conclusion
In summary, arbitrators have a unique, distinct role in ensuring that customer dispute information is expunged from the CRD system only when it has no meaningful investor protection or regulatory value. In addition to the standards outlined in FINRA Rules 2080, 2081, 12805 and 13805, arbitrators should consider the guidance in this notice when considering expungement requests.

1. FINRA Rules 12805 and 13805 state that in order to grant expungement of
   customer dispute information under Rule 2080, the panel must:
   a. Hold a recorded hearing session (by telephone or in person) regarding the appropriateness of expungement. This paragraph will apply to cases administered under Rule 12800 even if a customer did not request a hearing on the merits; b. In cases involving settlements, review settlement documents and consider the amount of payments made to any party and any other terms and conditions of a settlement;
   c. Indicate in the arbitration award which of the Rule 2080 grounds for
   expungement serve(s) as the basis for its expungement order and provide a brief written explanation of the reason(s) for its finding that one or more Rule 2080 grounds for expungement applies to the facts of the case; and d. Assess all forum fees for hearing sessions in which the sole topic is the determination of the appropriateness of expungement against the parties requesting expungement relief.
2. See FINRA Rules 12408 and 13412 (stating that the Director may exercise
   discretionary authority and make any decision that is consistent with the purposes of the Code to facilitate the appointment of arbitrators and the resolution of arbitrations).
3. FINRA Rule 2081 states that no member or associated person shall condition
   or seek to condition settlement of a dispute with a customer on, or to otherwise compensate the customer for, the customer’s agreement to consent to, or not to oppose, the member’s or associated person’s request to expunge such customer dispute information from the CRD system.

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ATTACHMENT C
FINRA ARBITRATION
Form Requesting Expungement on Behalf of an Unnamed Person This Form must be used to request expungement of customer dispute information from the CRD system on behalf of an unnamed person and to obtain the unnamed person’s consent to the request. Arbitration Case Caption and Number (“Customer Arbitration”) ______________________________________________________________________ ______________________________________________________________________ Name of Party Requesting Expungement on behalf of Unnamed Person (“Requesting Party”) Name of Associated Person Who is an Unnamed Person and Consents to this Request (“Unnamed Person”) ______________________________________________________________________ Representations Made by Requesting Party
1. The undersigned Requesting Party hereby notifies FINRA of the Requesting Party’s
intent to seek expungement of customer dispute information from the CRD system on behalf of the Unnamed Person identified above, pursuant to Rule 12805(a)(2).
2. The Requesting Party identified above agrees to represent the Unnamed Person and
the Unnamed Person’s interests and to pursue the request for expungement on behalf of the Unnamed Person during the Customer Arbitration.

3. If the Requesting Party withdraws or does not pursue the expungement request on
behalf of the Unnamed Person, the Requesting Party understands that the arbitrator or panel is required to deny the expungement request with prejudice. Representations Made by Unnamed Person
1. The undersigned associated person is an Unnamed Person, as defined under Rule
12100(ff), in the Customer Arbitration.
2. The Unnamed Person consents to the Requesting Party submitting a request to
expunge customer dispute information from the CRD system on the Unnamed Person’s behalf during the Customer Arbitration.
3. By signing the Form, the Unnamed Person agrees to maintain the confidentiality of
any documents and information from the Customer Arbitration to which the Unnamed Person is given access and to adhere to any confidentiality agreements or orders associated with the Customer Arbitration. The Unnamed Person understands that any breach of this provision could potentially subject the Unnamed Person to a claim for damages by an aggrieved party.
4. The Unnamed Person agrees that the arbitrator’s or panel’s decision regarding the
request for expungement of customer dispute information from the CRD system submitted by the Requesting Party on behalf of the Unnamed Person will be final and binding.
5. If the Customer Arbitration closes by award after a hearing, the Unnamed Person
agrees that they will be barred from filing a request to expunge the same customer dispute information in any subsequent proceeding.
6. The Unnamed Person understands that if the Requesting Party withdraws or does not
pursue the expungement request on behalf of the Unnamed Person, the arbitrator or panel is required to deny the expungement request with prejudice. __________________________________________________________________________ Party Name or Representative of Requesting Party Submitting Expungement Request on behalf of Unnamed Person (please print) _________________________________________________________ ___________________________ Party Name or Representative of Requesting Party Submitting Expungement Request on behalf of Unnamed Person (signature) Date Name of Associated Person Who is Unnamed in Customer Arbitration (please print) Name of Associated Person Who is Unnamed in Customer Arbitration (signature) Date