News & Insights

Sec Approves Finra Rule Change Applying Minimum Fees To Requests For Expungement Of Customer Dispute Information

On February 7, 2020, FINRA filed with the SEC a proposed rule change to amend FINRA’s Code of Arbitration Procedure for Customer Disputes and Code of Arbitration Procedure for Industry Disputes to apply minimum fees to requests for expungement of customer dispute information.  The SEC recently approved this proposed rule change in an order dated May 26, 2020, which was published in the Federal Register on June 1, 2020. 

These amendments will increase the minimum total fees per expungement request, which are paid by all parties, the claimant, registered representative and the respondent firm, to a total of $9,475.  Currently, parties to a FINRA arbitration claim are charged fees based on the amount at issue, and it is common for registered representatives seeking expungement to request $1 in compensatory damages, making the filing fee only $50 and allowing the parties to avoid a three-person panel that would be assigned to a non-monetary claim.  In this scenario, any pre-hearing and hearing sessions fees for the registered representative are also only $50, and the respondent firm would only be charged $150 in surcharge fees.  Thus, this new rule will drastically increase the fees for parties to an expungement proceeding by requiring the parties to pay, at a minimum, the fee structure currently in place for non-monetary claims, and will no longer allow parties to have a one-person panel simply by adding a small claim amount.

Registered representatives will have a minimum filing fee of $1,575 and minimum pre-hearing and hearing sessions fees of $1,125.  Member firms will have a minimum $1,900 surcharge fee and a minimum $3,750 process fee.  If it is a case where expungement is sought by a registered representative as part of an underlying proceeding, and not as a stand-alone claim, the minimum $1,125 hearing sessions fee will be required, but additional surcharge fees or process fees to the firm will not.   

This new rule and its effective date will be announced by FINRA in a regulatory notice, which must be published within 60 days of the SEC’s approval.  The effective date for the rule will be within 60 days following the publication of the regulatory notice.  The purpose of this amendments is to make all parties requesting expungement pay an increased minimum filing fee.