Aug. 18, 2022
August 18, 2022 The purpose of this letter is to provide the Securities and Exchange Commission with comments on the above referenced proposed rule change which was filed by the Financial Industry Regulatory Authority, Inc. (FINRA) on July 29, 2022. I am a retired attorney whose prior practice was exclusively devoted to the representation of individual and institutional investors in their disputes with the securities industry. Moreover, I am the immediate past Chairman of FINRAs National Arbitration and Mediation Committee (NAMC) and a former public member of the NAMC in fact, I served in both positions during two separate and distinct terms, the former Chairman of FINRAs Discovery Task Force Committee (DTFC), a former member of the Securities Investor Protection Corporation (SIPC) Modernization Task Force and a former President, former member and current Director Emeritus of the Public Investors Advocate Bar Association (PIABA). It is my understanding that the SEC seeks comment on a proposal to amend the FINRA Codes of Arbitration Procedure (FINRA Codes) which would 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). It is my opinion that the proposed rule amendments would enhance the balancing of the competing interests of providing regulators broad access to information about customer disputes to fulfill their regulatory obligations, providing a fair process that recognizes a brokers interest in protecting their reputation and ensuring investors have greater access to accurate information about their current and/or prospective financial professionals. It is my further opinion that the proposed rule amendments, individually and/or collectively, would codify and enhance recognition of the fact that expungement is an extraordinary remedy that would be allowed only in very limited circumstances. Notwithstanding the preceding, there is one (1) modification that I would request be considered in connection with the proposed rule amendments. This modification would be applicable to FINRA Rule 2080(b)(1) which currently requires that, in order to include expungement relief in an award, an arbitration panel must find that: (1) the claim, allegation or information is factually impossible or clearly erroneous (2) the associated person was not involved in the alleged investment-related sales practice violation, forgery, theft, misappropriation or conversion of funds or (3) the claim, allegation or information is false. It is my opinion that an additional predicate be added to FINRA Rule 2080(b)(1) which would be as follows: the Claimant did not sustain its burden of proof to support the claim, allegation or information that has been presented. This proposed modification would reduce the all-too-often predicate of the claim, allegation or information as having been false that seems to dominate a majority of the arbitration awards that grant expungement relief. Finally, it is my suggestion that the proposed rule amendments, if approved, should be closely monitored by FINRA and that all of the relevant statistics that are associated with all expungement requests should be publicly disclosed on the FINRA Dispute Resolution Services website on a monthly basis so that all interested parties can ascertain whether these proposed amendments have been effective in addressing the issues that have been consistently raised as to the overall expungement process. Thank you for providing me with the opportunity to submit my comments on this rule filing.