BenefitsPro (July 24, 2014) -- Unhappy investors now have a little more leeway when seeking arbitration over a dispute with their broker, now that the Securities and Exchange Commission has approved a new rule from FINRA.

According to the rule, firms and registered representatives are prohibited from making an arbitration settlement contingent on the customer’s agreement to allow expungement of the dispute from the Central Registration Depository (CRD) system — or at least not to object to such an expungement.

Rule 2081 means that it will now be easier to uncover details about complaints, something that the Public Investors Arbitration Bar Association (PIABA) said was “alarmingly” high in a study it released last October.

See also: ‘Alarming’ number of brokers’ arb records wiped clean

The study looked at 1,600 arbitration cases that were filed between Jan. 1, 2007, and Dec. 31, 2011 in which the word “expungement” appeared, and found that in 89 percent of cases between Jan. 1, 2007, through mid-May 2009, expungement was granted in stipulated awards or settlements. Reporting requirements changed in the middle of May, and after that time till the end of the period examined by PIABA, the rate of expungement escalated to 96.9 percent.

The CRD system, which is operated by FINRA, contains considerable information about members and registered representatives, including, according to the agency, “personal, registration and employment history, as well as disclosure information including criminal matters, regulatory and disciplinary actions, civil judicial actions, and information relating to customer complaints and disputes.” CRD information is also the source of the information made public by FINRA through BrokerCheck.

See also: Can brokers get justice from FINRA?

To have a customer dispute removed from the CRD system and, by extension, BrokerCheck, brokers have to obtain a court order confirming an arbitration award recommending expungement relief.

Richard Ketchum, FINRA chairman and CEO, said in a statement, “This rule will prohibit firms and reps from conditioning settlements on a customer’s agreement not to oppose expungement, thus protecting the integrity of the CRD system and disclosure of material information to investors.”

The effective date of the new rule has not yet been announced, but will be published in a Regulatory Notice.