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Senator Calls for SEC to Strengthen FINRA Rules on Expunging Broker Records

In a letter to the SEC, the lawmaker who helped create broker-check called for tightening of rules on expunging broker records and payment of arbitration awards. Sen. Edward Markey (D-MA) asked SEC Chair Mary Jo White to look at strengthening rules promulgated 20 years ago to make it more difficult for brokers to expunge their records and to ensure that arbitration awards are paid.

Markey called for the SEC to require FINRA to develop more stringent standards when brokers request their records to be expunged, claiming that 90% of requests are granted by arbitrators and that methods should be reviewed to ensure that arbitration payments are paid -- $51 million of awards in 2011 are still unpaid. Markey also cited a Wall Street Journal article claiming that 5,000 brokers whose licenses were revoked are still practicing.

In response, FINRA claimed that only 5% of all arbitration cases were expunged. FINRA has been active recently on other fronts, taking action to require brokers to disclose retention bonuses to clients and calling for firms to adjust compensation to avoid creating incentives for brokers to recommend one product over another.

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