Last Updated 22 Jun 2020

Financial Industry Regulatory Authority

Category Industries
Essay type Research
Words 1117 (4 pages)
Views 372

The report analyses the process of "expungement" in detail and does so in a critical manner. The process essentially allows the brokers in the stock market to wipe out any related evidence to their history of financial misconduct from the records that are kept for public access by FINRA (Financial Industry Regulatory Authority). The analysis proceeds on the premise that the expungement process that is available as a resort to the brokers is one of the primary reasons why the financial misconduct is not being able to be curbed. The analysis cites statistics that the brokers who obtain an order of expungement and have their record wiped are more susceptible to be accused of financial misconduct in the future.

FINRA makes available to the public, that is investing in the Stock market, the information related to the brokers online, and an expungement order tends to remove the evidence or traces of infractions in the behavior and conduct of the brokers. This analysis entails the three significant aspects of the way that FINRA functions in respect to the expungement process – firstly, the fact that the expungement process only furthers the infractions that occur, and that the users of this process only tend to deviate more readily in the future;

Secondly, the usage of the expungement process is increasingly gender-based since these differences tend to affect the market reputation accordingly significantly; and thirdly, the analysis shifts towards the online website BrokerCheck which makes available the data related to broker misconduct online, and how the investors react to that data. These points have been analyzed in depth by the analysts, and their related literature has been reviewed.

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Undoubtedly, the first aspect that has been analyzed is done concisely and perfectly. The analysis is balanced as it highlights the pros and cons of the data that has been made available to the public by the FINRA via the website BrokerCheck. It is notable that the data available on BrokerCheck was not accurate which necessitated the process of expungement for the brokers since earlier, due to the inaccuracy of the data, they were unfairly penalized. The analysts made use of data that was available on BrokerCheck in order to conclude as to whether prior misconduct and the expungement lead the premise to further misconduct in the future.

However, it is notable that even though the data that has been used is vast and variable, it does not guarantee the accuracy of the results since the data itself is uncertain as to its verifiability. Besides, the report contradicts itself in one way as it states at one point that the expungement process is what will cause misconduct in the future, while on Page 15 of the report, it states that in several of the cases, prior successful expungement contributes to success in the future since those who undergo the successful expungement process tend to learn the process and the procedures.

The analysis has strongly suggested at many points within the study that the broker recidivism and the process of expungement go hand in hand, and that the statistics show that the unsuccessful expungements happen because the arbitrators are becoming a tad bit better at guessing whether granting expungement is likely to result in more misconduct in the future in any given case.

Besides, the assumption that following a successful expungement, the broker with the expunged record is likely to conduct financial misconduct in future is not entirely correct since there are a variety of other considerations as well that take part in deciding it and play a significant role in the decision. Factors such as gender of the broker and the political considerations also play a significant role, and thus, the outcome may differ depending upon the way these factors play out in the life of the broker. Hence, it is not safe to associate a successful expungement with the tendency of recidivism for the brokers since the circumstances may force an altered outcome to present itself.

There are a variety of other factors in this analysis that make the inferences drawn uncertain. One of the primary ones is that the data that has been used is incomplete. Majority of the data that has been made use of in this analysis is only of the registered brokers. However, a minimal consideration has been given to the unregistered brokers.

The conclusions have only been generalized for both the registered and the unregistered brokers. This makes the accuracy of the inference to be doubted. Another instance where the analysis contradicts itself is the inference from the initial phase of the analysis that either the expungement be successful or unsuccessful, the inferences as to the future misconduct can be drawn.

However, at the later stages of the analysis in Panels D and E, it was found that the financial market did not make any differentiation between the brokers who had clean records or the ones who got their records expunged over time, but who had, at one point of time, one or more instances of financial misconduct.

Further, BrokerCheck aptly does not show the records that have been expunged since that would defeat the purpose of the expungement process. It is also to be noted that one of the brokers has had his/her records updated falsely, thereby causing their record to be tarnished. In situations like these, the expungement process is what helps these brokers. Thus, it cannot be said absolutely that the process itself is worth scrapping. All needs to be done is to grant expungement in as limited cases as possible.

However, it is notable that the conclusion that has been drawn by the analysts in this paper may not be entirely up to the mark. Although the inferences have been drawn from pure statistics, it is not without a grain of salt that these inferences should be adopted. Further, the process of approval of an expungement by the arbitrators is not an easy task since the process has set standards of an expungement being granted to a broker who has committed an act that counts as financial misconduct.

No expungement is granted unless those standards are fulfilled, and further reforms are also suggested to be implemented in order to make the expungement process stricter than it earlier was. It also forces the broker to incur high costs when he/she is seeking expungement relief, and that the expungement will not be granted until and unless the panel has been satisfied that the concerned broker deserves the order of expungement to be passed.

Thus, the inferences that have been drawn in this analysis may prove to be incorrect once these proposed amendments to the Expungement rules have been permitted and implemented. These proposed reforms may significantly reduce the number of expungement cases that will come before the Arbitrators.

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Financial Industry Regulatory Authority. (2018, Aug 26). Retrieved from https://phdessay.com/financial-industry-regulatory-authority/

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