Dec. 21, 2022
December 21, 2022 Ms. Vanessa Countryman Secretary U.S. Securities and Exchange Commission 100 F Street, N.E. Washington, DC 20549-1090 RE: Comments to SR-FINRA-2022-024 (Proposed Rule Change to Amend the Codes of Arbitration Procedure to Modify the Current Process relating to the Expungement of Customer Dispute Information) as modified by Amendment No. 1. Dear Ms. Countryman: I am an attorney who has represented member firms as well as RFPs in FINRA arbitration proceedings. As part of our practice, my colleagues and I provide expungement consultation services for affected RFPs. Over the past few years, we have helped dozens of RFPs rehabilitate their registration records and expunge therefrom factually impossible, clearly erroneous, and false claims. I respectfully submit these comments from my perspective as a practitioner to rebut some of the comments made by FINRA and several supporting commenters as well as to validate and corroborate the concerns raised by the many opposing commenters. As a first matter, I would like to join and reiterate the comments made by several dozen RFPs along with those made by Hennion Walsh, SIFMA, AdvisorLaw, and the other commenters who expressed concerns and opposed the proposed rule changes (the Proposal). These commenters cited compelling examples of some of the unfairness and frustration that RFPs face with the current expungement process and reporting rules. They also expressed concern that the Proposal would make the process for obtaining expungement relief even more difficult, unfair, and costly for RFPs without adequate justification for doing so. My comments are summarized as follows: 1) The Proposal is not supported by the data 2) FINRA is taking an erroneous approach in failing to give proper consideration to the issues raised by RFPs and industry stakeholders and 3) The Proposal raises several due process concerns, including de facto abrogating parts of FINRA Rule 2080 via procedural and technical changes. 1) The Proposal is not supported by the data. Investment firms and RFPs are required to report certain customer dispute information regardless of whether the claims have any merit. As stated by other commenters, the current claim reporting system is allegation-based and not merit-based. This allegation-based reporting system is not limited to complaints where RFPs are named as parties and, consequently, results in over-reporting of claims and errors. The data cited by FINRA as the basis for the Proposal does not show problems with the current expungement process, but rather correlates with a) the large number of erroneously reported claims caused by either misidentification of an RFP or insufficient time for RFPs to verify claims that do not identify specific RFPs, and b) the high incidence of meritless claims. Although I have not formally compiled data on this subject, my estimate based on periodically reviewing FINRA awards over the past few years is that at least half of expungement requests are based on these types of identi fication errors, which are also granted at a higher rate than other expungement requests because they are straightforward and often supported by the customers. Other commentors have accurately covered the issues concerning the high incidence of meritless claims, the costs of litigation, and how generic and formulaic allegations against RFPs are regularly included in said claims. However, I wanted to take a moment to expand on the incidence of misidentified RFPs and misreported claims. Per FINRAs rules, a customer dispute is reportable against an RFP if the claim equals or exceeds a certain amount, includes certain securities related misconduct allegations, and the RFP is a named party, identified in the allegations, or can be reasonably identified from the allegations following a good faith investigation. See FINRA Regulatory Notice 09-23. In practice, unnamed RFPs can be reasonably identified from the allegations if they are listed as the customers financial advisors of record at the time the complaint was filed and/or at various times during the period described in the complaint. Because many RFPs work in teams and/or have different kinds of agreements in place with other RFPs, and because several different RFPs and/or groups of RFPs may have been associated with any given customers account over the years, a single customer dispute will often be reported against several RFPs regardless of either its merits or whether any those RFPs were involved in the alleged conduct. FINRAs reporting rules are such they also require claims to be reported against one or more RFPs if they are named parties or specifically identified in the allegations, even if the allegations against them are factually impossible and/or clearly erroneous. See FINRA Regulatory Notice 03-23 at FN7. Examples of factually impossible and clearly erroneous allegations of misconduct include those made against licensed client services staff, FA trainees, or in-house consultants who are mistakenly identified in the complaint due to error and the limited information customers counsel had to work with when drafting the complaint. The misconduct allegations against these RFPs can be factually impossible and/or clearly erroneous for several reasons, such as: the alleged misconduct (i.e., misrepresentation of investments and unsuitable recommendations) was outside the scope of their job duties, they were neither licensed nor working at the firm or branch at the time of the alleged misconduct, no client-advisor relationship existed between them and the customers, and so on. At times, a complaint may also mistakenly identify a similarly named RFP along with their CRD number. RFPs may also be misidentified in claims due to copy/paste errors, where a line from a previous complaint identifying an RFP carries over to a new complaint that should have identified a different RFP. Under the current rules, all the foregoing claims must be reported on the misidentified RFPs records despite their verifiable inaccuracy and lack of regulatory or investor protection value. The short 30-day window to report customer claims also contributes to misreporting. Some cases are straightforward, and the RFP immediately knows that they were not involved in the claim. However, for other RFPs it can be more difficult to verify and investigate a claim in the short period of time. Some RFPs have been in the industry for many years and built a significant book of business with hundreds of customers. They may not recall whether they sold securities to a complaining customer or if the customer was reassignment or transfer. Depending on the circumstances, an RFP may misreport a claim under the reasonably identified requirement even though further investigation reveals the allegations, as applied to them, are factually impossible (i.e., the allegedly misrepresented security at issue was purchased with another RFP while the reporting RFP was employed at a different firm). In cases where several claims related to the same securities and/or market events are filed around th e same period, an RFP may not even catch a copy/paste error or may have insufficient time to provide customers counsel with information to verify and correct the error prior to the reporting deadline. The data cited by FINRA as the basis for the Proposal reflects the frequency of these types of errors. FINRAs Discussion Paper on Expungement (DPE) indicates that, for the period from January 2016 through December 2021, roughly 8% of all RFPs had at least one customer claim reported against them and slightly less than 0.8% of all RFPs had obtained expungement of at least 1 customer dispute. See DPE at p. 5. When taken into proper context, this data is consistent with the extraordinary nature of expungement relief. The large number of expungement requests and awards based on grounds that the claim was factually impossible, clearly erroneous and the RFP was not involved supports that conclusion. And, as stated by other commenters, a significant number of the expungement requests from the sample period in the DPE also correlated to market events and expungement rule changes. Not considering these and other factors when analyzing the data is a recipe for misinterpretation and incorrect c onclusions. For example, one expungement rule change related to fees seems to have triggered the filing of a larger than normal number of straight-in expungement requests during the sample period. See DPE at p. 12. The data shows that periods of Q1, Q2, and Q3 of 2020 had more straight-in expungement requests filings than the entire prior and following years combined, and that said increase correlates with the time leading up to the effective date of the rule change. The impression from reviewing samples of the expungement awards issued following that rule change is that many RFPs appear to have had stronger-than-average expungement cases were left pending for a later time and, to avoid the increase in costs related to the rule change, many of those stronger-than-average expungement cases were simultaneously filed around the same period. Based on these circumstances, it is reasonable to conclude that the inclusion of that period skews the data in a way that inaccurately reflects expungement requ ests as being more frequently made and granted than the actual overall trends, which reports for prior periods reflected as being less than half of those from the EDPs sample period. Moreover, FINRAs data shows a downward trend of straight-in expungement requests following the implementation of that last expungement rule change. Per the DPE, excluding the year of the rule change, straight-in expungement requests were down by around 40% in 2021 from 2019. The declining numbers of straight-in requests further throws into question the necessity of the changes included in the Proposal. 2) The Proposal takes an erroneous approach in failing to give proper consideration to the issues raised by RFPs and industry stakeholders. As indicated by several comments, FINRAs predecessor, the NSAD, previously concluded that the approach to crafting expungement rules necessarily required a balancing of three competing interests: (1) the interests of NASD, the states, and other regulators in retaining broad access to customer dispute information to fulfill their regulatory responsibilities and investor protection obligations (2) the interests of the brokerage community and others in a fair process that recognizes their stake in protecting their reputations and permits expungement from the CRD system when appropriate and (3) the interests of investors in having access to accurate and meaningful information about brokers with whom they conduct, or may conduct, business. See NASD Notice to Members 04-16, NSAD NTM (March 2004) at p. 212. In promulgating the Proposal, FINRA has set aside this interest balancing approach and declined to give proper consideration to comments by RFPs, member firms, and attorneys who raised n umerous concerns about the Proposal. The overwhelming sentiment from the RFPs who filed comments during the first comment period was the current expungement process was already unreasonably unfair and onerous for RFPs, and the Proposal would make it even more. A few of the Proposals failings in factoring in the interests of RFPs and the brokerage community include: disallowing expungement requests from non-party RFPs to be withdrawn prior to final hearing if requested in the underlying action imposing non-substantive technical requirements on the participation of RFPs while specifically making those same requirements inapplicable to other participants prohibiting RFPs from initiating FINRA proceedings against customers to seek expungement relief and prohibiting ranking or striking of arbitrators in industry dispute cases where expungement relief is sought, among other things. a) Withdrawing Expungement Requests There are number of valid and practical reasons for why a non-party RFPs request for expungement may be withdrawn prior to final hearing, the most common being time and costs. FINRA acknowledges that its rules allow straight-in requests for multiple expungement cases involving the same set of facts, which results in efficiencies in costs, time, and resources. See FINRAs Response to Comments (RtC) at FN87. As such, it seems unjustified to disallow expungement requests to be withdrawn without prejudice when said withdrawals are meant to save time and expense by combining several claims related to same set of facts into one proceeding. Expungement requests may also be withdrawn either during final hearing or after settlement because respondents counsel does not have experience with expungements and the affected non-party RFPs do not have their own counsel. Another common occurrence is that expungement requests made on behalf of non-party RFPs who were identified in error or not involved in the alleged misconduct are often withdrawn if the main case goes to final hearing. In those cases, counsel for the parties may not want to distract from the issues of the main case during final hearing, especially if the non-party RFP has nothing material to testify about. FINRA Rule 12805(a) requires the Panel to hold a recorded hearing session on the request for expungement and complying with that requirement during a final hearing can sometimes be unpractical and delay the resolution of the main claim, especially when a case has many moving parts that are unrelated to the non-party RFPs. FINRA seems to acknowledge as much in its response to comments when providing justification for denying non-party RFPs the right to intervene in the underlying case that is the subject of their expungement request. See RtC at p. 29. It seems inconsistent that FINR A would acknowledge as much but not consider how that same scenario is a valid and common justification for withdrawing an expungement request during an underlying arbitration. b) Non-party RFPs intervention in arbitration cases for the purpose of expungement Also, for the same reasons cited by FINRA as justification for requiring RFPs to see their expungement request through a final hearing discussed below, it seems counter-intuitive to deny an affected intervening RFP the chance to have their expungement request heard before the panel with the presence of the customers and their counsel. Flat out denying an affected RFP the opportunity to intervene for the sole purpose of seeking expungement in the main claim increases the amount of time the RFP must continue to have an erroneous claim reported on their CRD. The fact that the RFP is not material to claim makes their claim for expungement even more valid. After the main case closes, it will take a minimum of six months for the RFP to get to an expungement hearing through a straight-in request, and then several more months to complete the process of confirming the award and processing the expungement. The rules should be flexible and balance the interests of the different participants and stakeholders to allow for the most fair, speedy, and inexpensive resolution of the matters at bar. RFPs should be allowed to intervene or withdraw expungement requests when appropriate depending on the situation. One possible solution for the intervention issue could be to allow for a sub-proceeding between the intervening affected RFP and the parties where a separate award on the matter of expungement is issued by the same panel without affecting the resolution of the main award. c) Requiring respondent RFPs to have their expungement requests decided if an arbitration goes to final hearing Worse yet, the Proposal requires an RFP who is a named party to request expungement in the original case and see that request through should the case go to final hearing. FINRA should keep in mind that attorneys work with limited information when drafting pleadings and most of the time only include generic non-specific allegations when it comes to RFPs. An attorney may see the names of RFPs in a statement and include them as respondents or they may look up the current branch manager on the firms website and include the branch manager as a respondent even though they have not been provided with specific facts relating to any of these RFPs. It is difficult enough for RFPs to defend against generic non-specific allegations, but there are also times when the RFPs are included as a mistake. The branch manager may have either never been assigned to the branch in question or assigned to it around the time the first claims were filed and, thus, was not involvement in any alleged misconduct. The RFPs whose names appeared on the statements could have acquired the accounts from a departing FAs book around the time the claims were filed, meaning there was no client relationship with any of the customers during the time relevant to the claims. In these scenarios, several claims naming these RFPs as respondents could be filed before the mistakes become evident to claimants counsel. Under the Proposal, if these claims went to final hearing, each final hearing must include an expungement hearing on the mistakenly named RFPs or the RFP will otherwise lose their right to request expungement. Depending on the number of claims, the task could be too dauting for an RFP to see through, due to the time and the costs involved. These examples might seem like outliers, but we have seen upwards of 30 or more cases filed against the same mistakenly named RFP respondents with the error not becoming evident to claimants counsel more than half a year after the first claim was filed. Under the Proposal, those RFPs would potentially have to testify about the mistake 30 plus times, not to mention bear the fees and costs of those 30 plus expungement hearings. See FINRA Rule 12805(d) (Proposal Rule 12805(c)(9)). Under the current rules, these mi snamed RFP respondents were able to withdraw their expungement requests in the main cases and obtain expungement of those claims through straight in requests, with claimants counsel assisting in correcting their errors and supporting expungement. d) Prohibiting RFPs from filing straight-in expungement requests against customers Prohibiting RFPs from filing expungement requests against customers likewise presents problems and seems counter-intuitive. Although infrequent, filing the expungement request directly against the customers solves many of the problems that the Proposal purports to remedy. The customers in these cases must be formally served and they can strike and rank arbitrators, present their own evidence, and even file counterclaims against RFPs if appropriate. These types of cases, which sometimes occur in relation to expungements of demand letters sent directly to the RFP or the branch, present all the adversarial elements associated with a main customer dispute arbitration claim. Closing the door to this type of proceeding while imposing burdensome and costly non-substantive technical requirements to other forms of straight-in requests could see a further rise in state court defamation cases against customers and their counsel. Having an increasing number of RFPs seeking expungement in state c ourt defamation cases could also put a strain on FINRAs resources, as FINRA must be named as a party in state court proceedings seeking expungement unless a waiver is obtained. Another concern is that this prohibition could also create an unintended loophole that allows customers and their counsel to skirt responsibility in state court defamation cases that include expungement requests. The prohibition creates the possible scenario whereby respondent customers in a state court defamation case might allege that the claim must be subject to arbitration in FINRA, and then during the FINRA arbitration seek to dismiss the claim citing to the prohibition against expungement requests filed directly against customers. The Proposal should include an exception to allow straight-in expungement requests and related claims between RFPs and customers in cases where the respondent customers seek to compel arbitration as a defense in a state court proceeding that includes an expungement request. e) Non-substantive technical requirements to RFPs participation Also, by imposing non-substantive technical requirements on the participation of RFPs while expressly making those requirements inapplicable to other participants, FINRA and the supporting commenters recognize the informal nature of arbitration proceedings and the benefits of having flexibility with the rules to promote participation. FINRA should allow the panel discretion to the decide the manner in which RFPs and other participants will appear and participate at the hearing. At minimum, the RFP should be allowed the same flexibility as the customers and any other participants. Also, as explained below, the imposition of these requirements also raises due process concerns because they allow for scenarios whereby RFPs could be denied expungement relief for non-substantive technical reasons and matters beyond their control. 3) The Proposal raises due process concerns. RFPs have property and liberty interests in their licenses and professional reputations. See e.g., Patterson v. City of Utica, 370 F.3d 322, 329-330 and 335-337 (2nd Cir. 2004) (public employees liberty interest in professional reputations and right to name-clearing hearing) and Spevack v. Klein, 385 U.S. 511, 516 (1967) (The threat of disbarment and the loss of professional standing, professional reputation, and of livelihood are powerful forms of compulsion to make a lawyer relinquish the privilege.). The applicable law states that a name-clearing hearing must conform to the Due Process Clause and provide the affected individual an opportunity to be heard at a meaningful time and in a meaningful manner. Patterson, supra, 370 F.3d at 336 (citing Goldberg v. Kelly, 397 U.S. 254, 267 (1970). To assess the constitutional sufficiency of these proceedings, a court must examine and balance the following factors: (1) the nature of the interest affected by the official action (2) the govern ments interest and (3) the risk of error and the effect, if any, of additional safeguards. Id. (citing Mathews v. Eldridge, 424 U.S. 319, 335 (1976). The accumulation of inaccurate customer dispute information on an RFPs registration records greatly affects their ability to build their book of business, register in additional jurisdictions, obtain or maintain various professional designations, and pursue lateral career opportunities, promotions, and/or employment at other firms, among many other things. As stated by other commenters and acknowledged by FINRA, there are also concerns of the aggregate effect of Proposal and the newly adopted FINRA Rule 4111, which establishes an annual calculation for all member firms based on several metrics to determine whether they should be classified as Restricted Firm and be subject to additional obligations. See RtC at 32-34. The metrics used in Rule 4111s preliminary criteria for identification include the total number of disclosures between the members employee RFPs, and Rule 4111 specifically contemplates a one-time staff reduction of RFPs with a high number of disclosures as way to avoid meeting the preliminary criteria for identification. See FINRA Rule 4111(c). In its RtC, FINRA estimates that the economic impacts of FINRA Rule 4111 on firms hiring and registered persons seeking employment would likely be limited to a small proportion of firms and RFPs, but the fact of the matter remains that there will be an impact for at least some firms and RFPs in the near-term and continuing in the long-term. Id. at 34 and FN142 (FINRA acknowledged that RFPs with a significant number of disciplinary or other disclosure events on their records may find it difficult to retain employment, or get employed by new firms (particularly where those firms and their registered persons already have disciplinary records), and that firms meeting the Preliminary Criteria for Identification or close to meeting the criteria may find it difficult to hire RFPs with disclosure events.). Although the concerns relating to the aggregate effects of Rule 4111 were originally raised as an example of t he Proposals foreseeable detrimental effects to the industry as a whole, it also helps us see and understand the nature of RFPs liberty and property interests in ensuring the accuracy of the information and disclosures reported in their registration records. The important nature of the interests of regulators in retaining broad access to customer dispute information to fulfill their regulatory responsibilities and investor protection obligations and of investors and firms in having access to accurate and meaningful information about brokers with whom they conduct, or may conduct, business is undisputed here. However, in the pursuit of those interests, the Proposal creates several unnecessary risks of errors that could potentially deprive RFPs of their liberty and property interests in their professional reputations, licenses, and employment without adequate due process. A few of these unnecessary risks include potential and unintended consequences relating to the Proposals Special Roster of Arbitrators, unanimity requirement, non-substantive technical requirements, prohibition of ranking and striking arbitrators, time limits on filing straight-in expungement requests, requirement that named parties seek expungement during the main action , and limitations to seeking expungement in certain circumstances. For the Proposal to withstand constitutional scrutiny, these risks can and should be mitigated by implementing additional safeguards. a) Special Roster of Arbitrators There have been several changes to the Special Roster of Arbitrators since it was originally proposed. In its current iteration, there is no requirement for arbitrators on the Special Roster to have previously heard and decided an expungement request. The only requirements are that they complete the expungement training modules and have served as arbitrators in at least four arbitrations that were decided after a final hearing. This means it is now possible for a randomly selected panel of 3 arbitrators who have never heard or decided an expungement request to be assigned to a straight-in expungement request, which needlessly increases the risk of an erroneously denied request. There are enough arbitrators the Chairpersons pool that meet the criteria and also have extensive expungement experience, so there is no reason create an unnecessary risk of error by including inexperienced arbitrators in the Special Roster. Having panels consisting of inexperienced arbitrators will also have the collateral effect of increasing the time and costs associated with expungement cases because a greater degree of briefing and explanation that will be required to help the panel understand the issues at bar in a given case. The foregoing concerns are greatly reduced under the current system, which allows for ranking and striking inexperienced arbitrators. b) Unanimity requirement for granting expungement relief. The due process concerns related to including inexperienced arbitrators in the Special Roster are amplified by Proposals requirement that awards granting expungement relief be unanimous. This new unanimity requirement is exclusive to expungement requests and only requires that granting the expungement request be unanimous, which means that one panelist can single-handedly deny an expungement request even though the other two would grant it. First, jurisdictions that require decisions to be unanimous generally require that said decisions be unanimous one way or another, not that only one specific result must be unanimous. The fact that RFPs interest in their professional reputations do not require the same amount of consideration is a cause for concern. If unanimity is going to be required when requesting expungement, unanimity should be required for both granting and denying the request. The benefit of requiring unanimity is that the fact finders deliberate and issue a measured and p roperly considered decision. Allowing a single fact finder in the group to unilaterally deny an expungement request without explanation or deliberation needlessly increases the risk of an erroneously denied request. Also, FINRA arbitrations are informal proceedings and are not designed for unanimous awards. There are no arbitrator fee provisions for deliberating over an award. See FINRA Rules 12214 and 13214. Another concern is that FINRA awards must be issued withing 30 business days after the close of the hearing. Under the current system, only two signatures are required to have a valid award. Under the Proposal, FINRA would need all three signatures prior to serving the award. This creates a unnecessary risk of an expungement award being invalidated if one of the three Arbitrators does not send their signature within the required period. Although this risk is low, there have been cases where an Arbitrator is traveling or otherwise unable to send their signature within the 30-day period. Couple that with prospect of having an inexperienced arbitrator delay in drafting and circulating the award for signature and that risk increases further. Under the current system, which allows for majority s igned awards, these risks of error are greatly reduced. Moreover, as mentioned by other commenters, the justification for this change does not outweigh the risks it creates given that around 98% of expungement awards are already unanimous. c) Non-substantive technical requirements The imposition of several non-substantive technical requirements creates further unnecessary risks of error. The first of these is the requirement on the party seeking expungement to include the customers current address in the petition as opposed to their last known address or the address provided in the customers complaint. Some complaints also only include the address for the customers attorneys while others involve estates, trusts, or corporations that may have been wound down during or immediately following the claim, making it difficult to verify the customers current address. In such cases, the panel should be given some degree discretion in determining the proper manner to serve the customers. An error in the listed current address in the petition for expungement, after the appropriate diligence and attempts to correct the error, should not preclude the filing and granting of the expungement request. The same is true for non-substantive technical requirements imposed on the requesting RFPs participation. Depending on the circumstances, a power or internet outage should not have to force the parties to stop and reschedule an expungement hearing mid-way if other reasonable methods of participation are available. Expungement relief should likewise not be denied purely because of non-substantive technical problems. FINRA should be mindful that not all persons have the same kind of access to technology and bandwidth. As such, the panel should also have discretion to decide the appropriateness of the manner and form of the requesting RFPs participation given the circumstances. d) Time limits on straight-in requests As mentioned by several commenters, one the main problems with time limits on straight-in expungement requests is that RFPs, particularly FA trainees and licensed staff, may lack the resources to seek expungement within the time limit. Some RFPs may also not consider it important to seek expungement at the time, but may change their minds later on in their careers when they are seeking promotions, lateral moves, or employment with other firms. The aforementioned Rule 4111 could also result in a number of laid off RFPs filing arbitration claims against their former employers that, among other claims, include expungement requests for the disclosures that motivated the layoffs. The two-year time limit could see RFPs being denied the opportunity to clear their records at a time when they need it the most. A tolling mechanism through which FINRA and the parties are put on notice of the RFPs intention and grounds for seeking expungement would reduce this risk of error and allow RFPs to pre serve the right to clear their names once they are able to do so. Another problem concerns the fact that RFPs are usually kept separate from the underlying customer disputes. In cases where the claim has been Withdrawn or Dismissed against an RFP and is listed as such on their records, the RFP may not be made aware that the main arbitration has closed and, thus, the two-year time limit has begun to run. As set forth above, respondent RFPs must request expungement in the underlying case, but confusion arises when the claims against RFPs are voluntarily withdrawn or dismissed by the customers without settlement. Once the claim is withdrawn or dismissed against them, respondent RFPs lose access to any subsequent filings on the docket. The only way for them to know if the case has closed and can be expunged is if the other parties inform them. Normally, RFPs are informed of any settlements and awards through a U-4 amendment, but that does may not occur when a claim is voluntarily withdrawn or dismissed against the RFP. See FINRAs Form U4 and U5 Interpr etive Questions and Answers at p. 6. This can also happen when customers counsel files a notice of withdrawal of allegations against a misidentified non-party RFP. In those cases, which normally have strong grounds for expungement, the non-party RFP may likewise not be made aware the case has closed, especially if they are no longer working at the same firm. Not providing RFPs with proper notice of the arbitrations conclusion creates an unnecessary risk for them to miss the deadlines to file their straight-in requests. If FINRA is to move forward with the two-year time limit, it should adopt a procedure through which all RFPs who are affected by a given arbitration claim are given proper notice of the cases closure and the two-year time limit to seek expungement along with any applicable tolling procedure. e) Limitations to seeking expungement under certain circumstances The Proposals limitations to seeking expungement should make it clearer that said limitations only apply in cases where an expungement hearing was held, and the RFP was aware of such and participated at the hearing. An arbitration award or state court judgement that denies expungement without the RFP having participated in the proceedings or been given meaningful notice and opportunity to participate should not be subject to the limitations. As set forth above, the reason many expungement requests are withdrawn prior to going to final hearing is because of the risks of confusion for the various affected RFPs, who may have different grounds for seeking expungement. Some RFPs may not be called as witnesses at all while others may only be called to testify on a certain aspect of the case without ever touching on the issue of expungement. In such cases, where it can be reasonably established through hearing transcripts that the non-party RFP did not testify at all or did not testify as t o any issue relating to expungement, an award denying expungement relief should not trigger the limitation. The limitation should also not apply for state court judgements where the RFP did not participate nor had the opportunity to participate. A contrary result creates an unnecessary risk of error and raises due process concerns. f) Abrogation of FINRA Rule 2080(b)(2) through a procedural rule change As mentioned by several commenters, some of the Proposals changes result in the indirect abrogation of FINRA Rule 2080(b)(2) through a procedural rule change. FINRA Rule 2080 is a substantive rule and its modification requires a comprehensive rulemaking process through which FINRA must provide justification for making said change. FINRA has provided no such justification here. FINRA merely states that the change is meant to help arbitrators apply the correct standard when deciding expungement cases, but provides no evidence or data suggesting that arbitrators are applying an incorrect standard in arbitration cases in the first place. Expungement awards based solely on Rule 2080(b)(2) are rare, but they are nevertheless allowed under the current rules because NSAD and FINRA previously recognized that under some unaccounted-for circumstances expungement of a customer dispute for reasons other than the Rule 2080(b)(1) grounds may be plainly warranted because, among other things, the inf ormation is inaccurate and has no regulatory or investor protection value. This proposed change, especially when taken together with the other changes such as the inclusion of inexperienced arbitrators in the Special Roster and the unanimity requirement for granting expungement relief, increases the risks of expungement relief being erroneously denied without sufficient due process. A hypothetical example of the foregoing would be when one of the one arbitrators agrees that expungement should be granted but disagrees with the other two arbitrators on the whether any Rule 2080(b)(1) grounds apply. In this hypothetical, the customers support expungement, and the claim was originally reported because their attorneys identified the RFP in the claim as part of the same group of FAs. At the hearing it is established that the RFP requesting expungement never met or spoke with the customer and did not commit any sales practice violations. However, for whatever reason, the dissenting arbitrator refuses to grant expungement under any Rule 2080(b)(1) grounds based on his personal criteria and will only agree to expungement under Rule 2080(b)(2). Under the current rules, the RFP would have a expungement award under Rule 2080(b)(1) with a dissent as to the grounds, but under the Proposal the RFP would be denied an otherwise valid expungement request. Creating this additional risk of error and closing the door on expungements of inaccurate disclosures that have no regulatory or investor value is wholly unjustified. 4) Conclusion. For reasons set forth above as well as those set forth by dozens of other commenters, the Commission should disapprove the Proposal in its current state or, in the alternative, require amendments to include additional safeguards and remove the improper procedural changes. At present, FINRA is the primary path for RFPs to seek valid expungement relief. The Proposal seeks to further restrict that path without proper consideration for whats at stake for RFPs. Without alternatives or exceptions for outlier cases, this Proposal will negatively impact the investors and the brokerage community in the long term. I hope FINRA and regulators consider moving forward with a path for expungement through an administrative proceeding that addresses many of the concerns with the current process as well as the further concerns related to the Proposal should it be approved. Thank-you kindly for the opportunity to comment. I am available to answer any of your questions or discuss this matter further should you desire to do so. Sincerely, Russell Del Toro, Esq.