11.3 Mediation and Customer-Dispute Expungement

Investment Company and Variable Contracts Products Principal Series 26

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1 Chapter 1: Registration of the Broker-Dealer and Its Associated Persons

1.1 Broker-Dealer Registration, FINRA Membership, and Firm Filings 1.2 Individual Registration: Forms U4 and U5, Registration Categories, and Exempt Persons 1.3 Pre-Hire Screening, Fingerprinting, and Statutory Disqualification 1.4 Heightened Supervision, Interim Plans, and the Taping Rule 1.5 Broker-Dealers, Investment Advisers, Dual Registrants, and Unregistered Entities

2 Chapter 2: Training, Continuing Education, and Product Knowledge

2.1 Continuing Education (Rule 1240), the Maintaining Qualifications Program, and the Annual Compliance Meeting 2.2 The Investment Company Act of 1940: Classifications, Registration, and Fund Governance 2.3 Mutual Fund Pricing, Redemption, Exchanges, Sales Charges, and Share Classes 2.4 Variable Annuities and Variable Life Insurance: Structure, Charges, and Rule 2320 2.5 Closed-End and Interval Funds, UITs, Money Market Funds, 529 Plans, and Investment Risks

3 Chapter 3: Supervisory System, Conduct Standards, Insider Trading, and Discipline

3.1 The Supervisory System, Written Supervisory Procedures, and Standards of Conduct 3.2 Insider Trading, Information Barriers, and Personal Trading Supervision 3.3 FINRA Investigations, Disciplinary Proceedings, Sanctions, and Exemptions

4 Chapter 4: Communications with the Public

4.1 Communications Categories, Principal Approval, Filing, and Recordkeeping (Rule 2210) 4.2 Content Standards, Investment Company Advertising, and Professional Designations 4.3 Variable Contract Communications, Fund Rankings, Bond Fund Volatility Ratings, and Investment Analysis Tools 4.4 Correspondence and Internal Communications, Social Media, Public Appearances, and Telemarketing

5 Chapter 5: Recommendations, Customer Accounts, and Product Sales Supervision

5.1 Regulation Best Interest, Conflicts, and Form CRS 5.2 Know Your Customer, FINRA Suitability, and Institutional Accounts 5.3 New Accounts, Customer Authority, Discretion, and Order Handling 5.4 Mutual Fund Breakpoints, Share Classes, and Switching Supervision 5.5 Deferred Variable Annuities and the Seven-Business-Day Principal Review 5.6 Prospectuses, Summary Prospectuses, SAIs, and Ongoing Disclosures

6 Chapter 6: Compensation, Outside Activities, and Personal Conduct

6.1 Cash Compensation, Distribution Arrangements, and Conflicts 6.2 Gifts, Gratuities, and Business Entertainment (Rule 3220) 6.3 Training Meetings, Sales Contests, and Non-Cash Compensation 6.4 Referral Payments, Bank Networking, and Unregistered Persons 6.5 Outside Business Activities, Private Securities Transactions, and Rule 3290 Transition 6.6 Outside Accounts, Borrowing and Lending, Account Sharing, and Guarantees

7 Chapter 7: Customer Account Operations, Transfers, and Privacy

7.1 Account Records, Trusted Contacts, Confirmations, and Statements 7.2 Cash Accounts, T+1 Settlement, Regulation T, Extensions, and Freeriding 7.3 ACATS Transfers, Transfer-on-Death Accounts, and Account Changes 7.4 Regulation S-P, Incident Response, Service Providers, and Identity Theft

8 Chapter 8: Anti-Money Laundering, Customer Identification, and Sanctions

8.1 AML Program, Independent Testing, Training, and Governance 8.2 Customer Identification, Due Diligence, and Beneficial Ownership 8.3 SARs, CTRs, OFAC, Information Sharing, and AML Red Flags

9 Chapter 9: Supervisory Controls, Business Continuity, and Regulatory Reporting

9.1 Supervisory Controls, Annual Testing, and CEO Certification 9.2 Business Continuity, Systems Resilience, Cybersecurity, and Vendors 9.3 Rule 4530, FOCUS and Annual Reports, and Customer-Asset Events

10 Chapter 10: Office Classifications, Inspections, and Records

10.1 OSJs, Branches, RSLs, and Inspection Cycles 10.2 Inspection Reports, Independent Review, Signage, and Office Files 10.3 Broker-Dealer Books and Records, Electronic Storage, and Correspondence

11 Chapter 11: Complaints, Arbitration, Mediation, and Expungement

11.1 Customer Complaints, Investigation, Retention, and Reporting 11.2 Predispute Agreements, Arbitration Codes, Eligibility, Panels, and Awards 11.3 Mediation and Customer-Dispute Expungement

12 Chapter 12: Financial Responsibility, Membership Changes, and Investor Protection

12.1 Net Capital, Minimum Tiers, Haircuts, and Early Warning 12.2 Customer Protection, Possession or Control, Reserve Formula, and Exemptions 12.3 New-Product Review and Continuing Membership Applications 12.4 SIPC, Fidelity Bonds, Proxy Materials, and Financial Reports

11.3 Mediation and Customer-Dispute Expungement

Key Takeaways Explain This Topic AI

FINRA mediation is voluntary and nonbinding; a mediator facilitates agreement but does not impose an award.

A settlement should define payment, releases, confidentiality within legal limits, and treatment of the pending arbitration without restricting regulatory cooperation.

Customer-dispute information may be expunged only through the specialized FINRA process and required court confirmation or waiver procedures.

A straight-in expungement request is heard by a randomly selected three-person Special Arbitrator Roster panel with no party strikes, must be filed within two years after the related arbitration closes (or three years after CRD reporting if none), and requires a unanimous decision.

Rule 2080 focuses on whether the claim is factually impossible or clearly erroneous, the associated person was not involved, or the claim is false.

Last updated: September 2026

FINRA Mediation

Mediation under the FINRA 14000 Series is a voluntary, confidential, nonbinding process. A neutral mediator helps parties identify interests, evaluate risk and negotiate, but cannot order a result. Any party may end the process, and no settlement exists until the parties agree and document it.

Mediation can occur before or during arbitration. The parties should confirm how deadlines, discovery and hearing dates will be handled; starting mediation does not justify assuming another deadline has stopped. If settlement occurs, the agreement addresses payment, releases, dismissal and costs. It must not prohibit truthful regulatory communication, required reporting or cooperation with authorities.

Why Expungement Is Different

Customer-dispute information reported to CRD and shown through BrokerCheck serves investors and regulators. Expungement is an extraordinary remedy that removes specified customer-dispute information from the associated person's record; it is not ordinary settlement language and cannot be granted by a firm or customer acting alone.

Rule 2080's findings focus on whether:

the claim, allegation or information is factually impossible or clearly erroneous;

the registered person was not involved in the alleged investment-related sales-practice violation, forgery, theft, misappropriation or conversion; or

the claim, allegation or information is false.

The arbitrators must explain the grounds and reasoning in the award and address settlement documents and amounts where applicable.

Current Special Proceedings

Rules effective October 16, 2023 strengthened the process. A straight-in request —one filed separately rather than decided in the underlying customer arbitration—generally proceeds before a randomly selected three-person panel drawn from the Special Arbitrator Roster. Parties do not strike or stipulate to remove these arbitrators. The request is subject to strict time limits and is ineligible in listed circumstances, including certain prior adjudications or withdrawals.

State securities regulators receive notice and may participate. The customer also receives notice and may participate, provide documents and appear. The panel must agree unanimously to recommend expungement. Settlement or a customer's decision not to oppose does not lower the standard.

Court Confirmation and FINRA Participation

An associated person generally must obtain a court order confirming an expungement award and name FINRA as a party, unless FINRA waives that requirement under Rule 2080's process. The court step is not clerical permission to alter CRD before confirmation. The firm should route the award and court documents through registration and legal personnel and make changes only under authorized procedures.

Process Decision maker Result
Mediation Parties, assisted by mediator Enforceable settlement only if parties agree
Arbitration Arbitrator or panel Final and binding award

Expungement arbitration Qualified panel applying special standards Recommendation requiring applicable court/FINRA process

Court confirmation Court under governing law Order that can authorize CRD expungement steps
Principal Responsibilities

The principal should preserve the underlying complaint record, continue regulatory reporting, and investigate conduct regardless of a settlement or expungement request. No one should pressure a customer not to participate, offer undisclosed consideration for non-opposition, or describe expungement as guaranteed. The firm must keep Forms U4 and U5 accurate until lawful expungement is complete.

Expungement Eligibility Controls

A straight-in request is filed as an industry claim against the member firm where the associated person worked when the dispute arose (Rule 13805), and current rules impose strict limits. The request is untimely if more than two years have passed since the related customer arbitration or civil litigation closed or, when there was no arbitration or litigation, if more than three years have passed since the customer complaint was first reported to CRD. It is barred if a panel already held a merits hearing on expungement of the same information, a court previously denied it, the underlying arbitration, litigation or complaint is still open, a panel or court found the associated person liable in the related customer case, or the information involves the same conduct as a final regulatory action. Before supporting or reimbursing a request, the firm should confirm procedural eligibility, preserve the complete underlying case and identify any conflicts between the firm's interests and the associated person's. Reimbursement must not purchase customer nonparticipation.

At a hearing, the panel considers the customer's position even when the customer does not attend and reviews settlement documents rather than treating a negotiated payment as proof of falsity. The associated person bears the burden of proving the narrow grounds. An award recommending expungement is not itself permission to delete a complaint from internal records.

Mediation Practice

A useful mediation statement distinguishes agreed facts, disputed facts, damages and nonmonetary interests. The mediator may hold private caucuses, test assumptions and carry proposals, but confidentiality and admissibility follow the governing rules and agreement. If no resolution occurs, arbitration preparation continues without retaliation against a customer for rejecting a proposal.

Registration staff should monitor the case through the final court order and verify exactly which occurrence and disclosure are covered. Other related disclosures remain unless separately authorized, and internal complaint and supervision records continue under their own retention rules.