FINRA to Address Expungement Issues, Arbitration Chief Says

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By Antoinette Gartrell

March 18 — The Financial Industry Regulatory Authority is poised to address the practice of brokers continually being granted expungement of their disciplinary histories from industry databases, dispute resolution chief Richard Berry told Bloomberg BNA.

There isn't a timeline for the rule filing, but it's a “high priority” for FINRA, Berry said in a March 7 interview. The rule will codify and expand guidance issued in 2013, which stressed that expungement is an extraordinary remedy (45 SRLR 1926, 10/21/13). The guidance also set out steps for arbitrators in weighing expungement requests. “It will not only be guidance, but it will also be in our Code,” Berry said.

According to a recent report by the Public Investors Arbitration Bar Association, between 2012 and 2014, arbitrators granted expungement in roughly nine out of 10 cases that were resolved by stipulated award or settlement (47 SRLR 2025, 10/26/15).

In December 2015, the FINRA Dispute Resolution Task Force recommended that a special arbitration panel with enhanced training be comprised to handle expungement requests, Berry noted (47 SRLR 2408, 12/21/15). It's something that the self-regulatory organization is “looking into carefully.”

2016 Top Priorities

The high rate of expungement grants isn't FINRA's only concern. It has several other priorities in 2016, according to Berry.

First, it will consider the remaining 51 recommendations the dispute resolution task force made at the end of last year. The panel suggested that explained decisions be the default choice and that there be an automatic mediation process for cases filed in arbitration, both subject to opt-out provisions.

The dispute resolution task force also recommended increasing arbitrator pay from $300 to $500 per session, but maintaining the current 85/15 percent fee split between industry and customer participants. FINRA's National Arbitration and Mediation Committee discussed approximately half of the dispute resolution task force recommendations at its last meeting and will continue the discussion at its meeting this summer, Berry said.

In other priorities, Berry said that some time in the second or third quarter, FINRA hopes to make its online portal for filing cases and related documents mandatory for all parties except pro se participants (47 SRLR 1530, 8/3/15). Mandatory use of the portal, launched about two years ago on a voluntary basis, would streamline case processing for FINRA staff by allowing parties to electronically serve one another, make payments, and have immediate access to case information. There also would be less room for error and no mail delays, Berry said.

FINRA also is committed to improving customer service, Berry continued. The SRO already has provided for expedited handling of cases filed by seniors and those with medical issues and plans to speed up FINRA's “paper/simplified” case process. Paper cases are decided based only on the parties' written submissions.

FINRA also is continuing to expand its pool of arbitrators, and substantially exceeded its 2015 goal to have 650 arbitrators on board by the end of the year, Berry said. This year's goal is 750, and “we're already on target to beat that.” FINRA also hopes to increase the diversity of its arbitrator roster, and has “dramatically” increased its recruitment staff to that end, he added.

Other Concerns

Tackling the problem of unpaid arbitration awards also is very important to FINRA, Berry told Bloomberg BNA.

According to a recent PIABA report, investors failed to collect $62.1 million worth of FINRA arbitration awards in 2013 (48 SRLR 466, 3/7/16). Berry said the dispute resolution task force looked into the issue but couldn't decide on a solution. Currently, FINRA uses “expedited suspension proceedings” to remove from the industry brokers and firms that don't pay awards in a timely fashion, Berry said. “It's a huge tool that you don't get elsewhere,” he added. The issue is being closely monitored, and solutions are being considered, Berry stated.

For example, he told Bloomberg BNA, the dispute resolution task force considered requiring firms to have insurance, but concluded that the solution came with its own set of problems.

In other dispute resolution enhancements, Berry noted that FINRA offers a special mediation program for smaller cases as an alternative to its arbitration forum. The program offers smaller investors a “huge benefit,” in that mediation often is free or available for a very small fee.

Caseload Drop

In other arbitration developments, the number of new cases filed in 2015 dropped 11 percent from 2014. He said a long period of a “stable” stock market caused the drop.

However, as of February, new case filings are up 17 percent compared with February 2015—a spike likely attributable to recent market volatility, Berry said

By Antoinette Gartrell

To contact the reporter on this story: Antoinette Gartrell in Washington at

To contact the editor responsible for this story: Phyllis Diamond at


Richard W. Berry is Executive Vice President and Director of Dispute Resolution at the Financial Industry Regulatory Authority. He joined FINRA, then known as NASD, in 1995 as head of Dispute Resolution's Los Angeles office. After a series of promotions, he assumed his current role in late 2014.

Before joining FINRA, Berry taught American law for one year in Budapest. He began his career practicing law in San Francisco.

Berry is a graduate of the University of California at Santa Barbara and Hastings College of Law.

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