In our previous post, we documented dramatic filing spikes in 2020 and 2023, with certain months seeing 2-3x normal volumes. Now we can reveal what caused them: regulatory changes that made expungement significantly more expensive (2020) and procedurally harder (2023).
The data is unambiguous: 82-90% of spike month cases were expungement filings, not customer disputes. This wasn't market-driven chaos—it was a calculated economic response by brokers and their attorneys to avoid massive fee increases (2020) and procedural obstacles (2023).
What is Expungement?
Before diving into the data, let's clarify what we're talking about. In FINRA arbitration, expungement refers to removing negative information from a broker's Central Registration Depository (CRD) record and BrokerCheck profile.
This matters because:
- BrokerCheck is public - investors can look up any broker's disciplinary history
- Customer complaints appear on CRD even if unproven or resolved in the broker's favor
- Career impact - negative marks can affect job prospects and client relationships
- Expungement is the only way to remove these marks once they appear
Brokers file "Associated Person vs. Member" arbitrations to request expungement, naming their former firms as respondents (who often don't contest the request).
2023: New Expungement Requirements
On October 16, 2023, FINRA implemented sweeping changes to its expungement process (announced in Regulatory Notice 23-12) that made expungement dramatically more difficult to obtain:
What Changed
Before October 16, 2023:
- Single arbitrator could grant expungement
- Majority decision sufficient
- No strict time limits
- Lower evidentiary standards
- Little oversight from state securities regulators
After October 16, 2023:
- 3-arbitrator panel required (more expensive, harder to schedule)
- Unanimous decision required (all three must agree)
- Strict time limits imposed:
- Must file within 2 years after customer case closes
- Must file within 3 years after CRD disclosure appears
- Enhanced arbitrator training required
- Stricter evidentiary standards for granting relief
- State securities regulators invited to participate as parties in proceedings
The Impact: A Race Against the Clock
These amendments created a clear deadline: file before October 16, 2023 under the old rules, or face a much harder process under the new rules. Law firms marketed this urgency aggressively, and the data shows brokers responded exactly as you'd expect.
The 2023 Data:
Monthly FINRA Arbitration Filings - 2023
2023 Case Composition: Spike Months vs. Normal Months
Month | Total Cases | AP vs Member | % AP vs Member | Expungement Requested | % Expungement |
|---|---|---|---|---|---|
| October (Spike) | 274 | 257 | 93.8% | 243 | 88.7% |
| May (Spike) | 224 | 198 | 88.4% | 184 | 82.1% |
| April (Spike) | 162 | 142 | 87.7% | 136 | 84.0% |
| June (Normal) | 83 | 58 | 69.9% | 58 | 69.9% |
| January (Normal) | 86 | 66 | 76.7% | 56 | 65.1% |
What the Numbers Tell Us
Look at the "% Expungement" column:
- Spike months: 82-90% of cases were expungement requests
- Normal months: 65-70% of cases were expungement requests
The difference of 15-25 percentage points represents hundreds of brokers who accelerated their filings to beat the regulatory deadline.
💡 Key finding
October 2023 alone saw 243 expungement requests—that's as many as 3-4 normal months combined, all compressed into a single month before the rule change took effect.
Understanding the 2023 Spikes: Two Distinct Phases
The 2023 data reveals something fascinating: there were actually two separate filing surges driven by different regulatory events.
Phase 1: April-May Surge Driven By SEC Approval
On April 12, 2023, the SEC approved FINRA's proposed expungement rule changes. This approval, months before FINRA's official publication, immediately signaled to the legal community that the changes were certain to happen.
April and May 2023 saw 169 and 223 cases respectively—attorneys who had been monitoring the regulatory process moved quickly:
- Certainty of change - SEC approval meant the changes were no longer hypothetical
- Maximum time buffer - Filing immediately allowed months to complete hearings under old rules
- Strategic advantage - Beat the expected rush closer to the implementation deadline
- Arbitrator availability - Secure hearing dates before panels became overwhelmed
This surge represents the most sophisticated practitioners who track regulatory proposals closely and act decisively when approval comes through.
Phase 2: October Surge: FINRA Rule Deadline-Driven Final Rush
The October 2023 spike (275 cases) represents a different phenomenon entirely.
FINRA didn't publish Regulatory Notice 23-12 until August 11, 2023—just two months before the October 16 effective date. This compressed timeline created urgency for:
- Attorneys who needed official publication to justify filing to clients
- Brokers who only learned about the changes through August/September legal alerts
- Cases requiring quick preparation to meet the imminent deadline
- Final opportunity filers who wanted one last chance under favorable rules
The October spike was more than 50 cases larger than the May spike, suggesting many brokers waited until they saw the official notice before acting.
The 2020 Pattern: Fee Increases Drive Identical Behavior
The 2020 filing pattern shows a remarkably similar surge, with July (187 cases), August (253 cases), September (286 cases). The September 2020 spike shows 89.9% expungement—the highest expungement percentage in our entire dataset.
The pattern is remarkably similar to 2023, and for good reason: FINRA Regulatory Notice 20-25 implemented massive fee increases for expungement requests, creating the same dual-trigger dynamic.
The 2020 Data:
Monthly FINRA Arbitration Filings - 2020
2020 Case Composition: Spike Months vs. Normal Months
Month | Total Cases | AP vs Member | % AP vs Member | Expungement Requested | % Expungement |
|---|---|---|---|---|---|
| September (Spike) | 286 | 247 | 86.4% | 257 | 89.9% |
| August (Spike) | 253 | 219 | 86.6% | 228 | 90.1% |
| July (Spike) | 187 | 162 | 86.6% | 158 | 84.5% |
| October (Normal) | 84 | 56 | 66.7% | 51 | 60.7% |
| November (Normal) | 68 | 46 | 67.6% | 42 | 61.8% |
| December (Normal) | 85 | 58 | 68.2% | 52 | 61.2% |
The 2020 Fee Changes: A 28x Cost Increase
FINRA's Notice 20-25 fundamentally changed the economics of expungement:
Before September 14, 2020:
- Filing fees often avoided by adding $1 monetary claims
- No mandatory hearing session fees for expungement-only hearings
- No process fees or member surcharges consistently applied
- Total costs: ~$300 (by strategically structuring the filing)
After September 14, 2020:
- Filing fee: $1,575 (mandatory non-monetary claim fee)
- Hearing session fee: $1,125 (mandatory for expungement hearings)
- Process fee: $3,850 (for straight-in requests)
- Member surcharge: $1,900 (paid by broker's firm)
- Total costs: ~$8,450+ (no way to avoid)
That's a 28x increase in costs—a dramatic change that made filing before the deadline economically compelling.
2020: New Fee Schedules
May 26, 2020: SEC approves FINRA's fee changes (SR-FINRA-2020-005)
- July 2020: First surge (187 cases) - attorneys respond to SEC approval
- August 2020: Surge continues (253 cases)
September 14, 2020: New fees take effect
- September 2020: Final rush (286 cases) - deadline-driven filings
💡 Identical regulatory pattern
Both 2020 and 2023 show the same two-stage response: (1) sophisticated practitioners filing immediately after SEC approval, and (2) broader rush as the implementation deadline approaches. The only difference is the nature of the change—fees in 2020, procedural requirements in 2023.
Why Fees Matter as Much as Procedures
The 2020 data proves that cost increases are just as powerful as procedural difficulty in driving filing behavior:
- 89.9% of September 2020 cases were expungement (highest in dataset)
- Brokers rushed to lock in $300 total costs vs. $8,450+ under new rules
- The economic incentive was crystal clear: file now or pay 28x more
For a broker with multiple expungement requests, the savings could be tens of thousands of dollars—a compelling reason to act quickly.
Success Rates: Did They Get Expungement?
Here's the surprising part: the rush worked. Brokers who filed before the deadline had high success rates.
Expungement Award Rates
Period | Expungement Requested | Expungement Awarded | Success Rate |
|---|---|---|---|
| 2023-10 (Spike) | 243 | 222 | 91.4% |
| 2023-05 (Spike) | 184 | 156 | 84.8% |
| 2023-04 (Spike) | 136 | 120 | 88.2% |
| 2020-09 (Spike) | 257 | 214 | 83.3% |
| 2023-06 (Normal) | 58 | 44 | 75.9% |
| 2023-01 (Normal) | 56 | 45 | 80.4% |
Key observations:
- Spike months had 83-91% success rates for expungement
- Normal months had 76-80% success rates
- October 2023 had the highest success rate at 91.4%
This data suggests that either:
- Quality cases - Attorneys prioritized their strongest cases for the pre-deadline rush
- Panel favorability - Single-arbitrator panels (old rules) were more likely to grant expungement than 3-arbitrator panels would be
- Strategic filing - Experienced attorneys knew how to optimize timing and presentation
What's Next
This is Part 2 of a 3-part series on FINRA filing patterns:
- Part 1: The data overview—when do filings spike?
- Part 2 (this post): The mechanism—what drove the 2020 and 2023 filing surges?
- Part 3: The myth—do market crashes drive customer claims?
In our final post, we'll test the conventional wisdom that bear markets and market crashes trigger waves of investor arbitration claims. Spoiler: The data tells a very different story.
Our Methodology
Data Source: FINRA arbitration records.
Date Range: January 1, 2019 - December 31, 2023 (five complete years)
Sample Size: 6,244 cases
Filters Applied: Excluded subordinate consolidated cases (to avoid double-counting), excluded superseded amendments (only the latest version counted), excluded vacated awards and deleted records.
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For more details on regulatory changes:
- 2020 fee changes: FINRA Regulatory Notice 20-25
- 2023 procedural changes: FINRA Regulatory Notice 23-12