Brokerage firms cannot include a confidentiality provision in a settlement
agreement with a customer that restricts or prohibits communication with
the Securities and Exchange Commission ("SEC"), FINRA, or any
federal or state regulatory body. The Financial Industry Regulatory Authority
("FINRA") recently issued Regulatory Notice 14-40 reminding
members that a provision such as this is a violation of FINRA Rule 2010.
The caution comes from the Wall Street watchdog with the concern that such
provisions would impede, or have the potential to impede, FINRA investigations
and the prosecution of FINRA enforcement actions. Customers of a FINRA
member, or anyone else, must be able to disclose to the appropriate regulator
the underlying facts of the dispute upon inquiry.
According to Regulatory Notice 14-40, "confidentiality provisions
also cannot be used to prohibit or restrict an individual from initiating
communications directly with FINRA or other securities regulators regarding
the settlement terms or underlying facts of a dispute. For example, even
with a confidentiality provision in a settlement agreement, the customer
or any other person may, at any time, alert FINRA to potentially fraudulent
or suspicious activities by a firm or its associated persons through FINRA's
Investor Complaint Center, or communicate directly with SEC staff regarding
a possible securities law violation."
FINRA maintains the Investor Complaint Center on its website. Individuals
with evidence of, or material information about, potentially illegal or
unethical activity may also contact FINRA's Office of the Whistleblower.
According to the Notice, the same is true regarding documents that the
parties in arbitration have marked "confidential." FINRA notes
that this designation does not restrict or prohibit the disclosure of
the documents to the SEC, FINRA, or any other regulator. The Notice reflects
FINRA's efforts to encourage people with information to reach out
to a regulatory authority concerning a possible securities violation.
About the Meyer Wilson
Founded in 1999, Meyer Wilson is a boutique firm devoted solely to investor
claims and class action lawsuits. With offices in Ohio and California,
we practice nationwide, and have represented approximately 1,000 individual
and institutional investors. If you lost money through what you suspect
to be investment misconduct, contact a securities fraud attorney at Meyer
Wilson today. In 2014 alone, our law firm recovered more than $29 million.
We know how to secure results for our clients, so contact us today for
a free consultation if you suspect fraud or misconduct. Call us toll-free