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SEC Approves New Brokerage Industry Rule

The US Securities and Exchange Commission wants to make it a little harder for brokers to remove marks from their public records after consumer disputes.

Last week, the agency approved a new brokerage industry rule that will prohibit settlements between brokerage firms and investors that require the investor to agree to erase complaints from public records.

The SEC is concerned about how frequently FINRA arbitrators grant brokers’ request to erase black marks from consumer complaints, noting that occurs in a “high number of cases”.

Details of complaints are disclosed to the public by FINRA through a free database called BrokerCheck. But if brokers wanted to erase those unsightly details, they would simply file their own arbitration case and ask for the records to be expunged. And unfortunately, a study by the Public Investors Arbitration Bar Association found that between 2009 and 2011, brokers succeeded 96.9% of the time in having their records expunged.

According to the SEC, the new rule “should help assure that accurate and complete consumer dispute information remains available to the investing public”.


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