Deleting Misconduct: The Expungement of BrokerCheck Records


Publish Date:
February 15, 2021
Publication Title:
Journal of Financial Economics
Journal Article Volume 139 Issue 3 Pages 800-831
  • Colleen Honigsberg & Matthew Jacob, Deleting Misconduct: The Expungement of BrokerCheck Records, 139 Journal of Financial Economics 800 (2021).
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We examine a controversial process, known as expungement, which allows brokers to remove evidence of financial misconduct from public records. From 2007 to 2016, we identify 6660 expungement requests, suggesting that brokers attempt to expunge 12% of the allegations of misconduct reported by customers and firms. When these requests are adjudicated on the merits, arbitrators approve expungement 84% of the time. We show that expungements significantly predict future misconduct; brokers with prior expungements are 3.3 times as likely to engage in new misconduct as the average broker. Further, using an instrumental variable based on the random assignment of arbitrators, we present evidence that brokers who receive expungement are more likely to reoffend than brokers who are denied expungement. We also show that successful expungements improve long-term career prospects.