Burr & Forman

07.24.2014   |   Blog Articles, Expungement, FINRA, SEC, Securities Litigation

SEC Approves Amended FINRA Rule 2081 Prohibiting Settlements Conditioned on Expungement

On July 22, the SEC approved amendments to FINRA Rule 2081 that prohibit member firms from conditioning arbitration settlements (or seeking to) upon a customer’s assent to CRD expungement relief. The Rule amendments prohibit paying any consideration or compensation for expungement relief and apply even if a customer suggests such a bargain. SEC Rel. No. 34-72649 (July 22, 2014). In cases that may warrant expungement relief under the conditions specified in Rule 2081, SIFMA’s comment letter suggested, and FINRA responded approvingly to, using settlement-agreement language reciting that: (1) Respondents intend to seek expungement relief; (2) expungement relief was not a condition of the settlement; (3) Respondents have not paid any consideration related to expungement; and (4) the Claimant may participate in expungement proceedings as (s)he chooses. We addressed FINRA’s Rule proposal earlier this year, “FINRA Moves to Make Expungement Independent” (May 14, 2014), here. Thomas K. Potter, III (tpotter@burr.com) is a partner in the Securities Litigation Practice Group at Burr & Forman, LLP. Managing Partner of the Nashville office, Tom is licensed in Tennessee, Texas and Louisiana. He has over 28 years’ experience representing financial institutions in litigation, regulatory and compliance matters. © 2014 by Thomas K. Potter, III (all rights reserved).

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