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Study Finds That Expungement is Granted in a Large Percentage of Broker-Dealer Arbitration Settlements

Tuesday, October, 22, 2013


 

According to a new study released by the Public Investors Arbitration Bar Association, a high percentage of investor-filed arbitration cases filed between January 1, 2007, and December 31, 2011 ended in expungement relief.  The study also revealed that between the beginning of January 2007 and May 17, 2009, 60.3% of arbitration cases filed with the Financial Industry Regulatory Authority (FINRA) allowed broker-dealers to expunge the claims from their records. 

 

Findings of the study also show an even more alarming trend.  Between January 1, 2007 and the middle part of May 2009, expungement was granted in almost 90% of cases that involved stipulated awards or settlements.  From May 2009 to the end of 2011, that number increased to 96.9%. 

 

Jason Doss, the incoming president of the Public Investors Arbitration Bar Association and owner of the Doss Firm LLC in Marietta, Georgia, admits that the expungement process is “clearly broken.” “We have believed for some time now,” says Doss, “that expungements are a significant investor protection issue, but this new study from PIABA now documents precisely just how bad the situation is.”

 

As a way to resolve the problem, the study recommended that FINRA changes its rules related to broker-dealer arbitration, making it a violation to negotiate for expungement relief.  The study also recommends that FINRA play a more active role by carefully reviewing all motions filed for expungement relief and ramp up its training for arbitrators regarding when expungement relief should be granted. 

 

In a statement issued after the results of the PIABA study were released, FINRA admits that there are serious problems related to arbitration and the expungement relief process.