The Financial Industry Regulatory Authority Inc. wants to make pending regulatory complaints much more visible to the public.
The Securities and Exchange Commission on Thursday published the
Finra's proposal for comment.
Finra wants the ability to publicize more of the complaints it files against registered representatives and firms, through its monthly notices of disciplinary actions and its online disciplinary action reporting system.
Currently, most pending Finra complaints are disclosed only in summary form on the separate BrokerCheck system, based on disclosures made on the U4 form. Finra itself will not usually release the complaint.
In its filing, Finra said it wants to correct inconsistencies in how disciplinary information is released.
Specifically, “BrokerCheck reports may include unredacted summary information regarding a Finra disciplinary action that Finra is not permitted to release” in its monthly notices or online disciplinary system, the self-regulatory organization said.
“It's another example of disclosing a broad amount of negative information against a broker,” said Sylvia Scott, a partner at Freeman Freeman Smiley LLP.
“It's one thing if you have a finding on the merits” of a complaint, she said, “but when you have the full official complaint [released] and plaintiff's lawyers introduce these into arbitrations where anything goes, it really can be more prejudicial.”
The rule change would make “publicly available information more consistently available across all of Finra's publicity channels,” countered plaintiff's attorney James Eccleston, of the Eccleston Law Offices PC, who supports the move.
The SEC already posts on its website most complaints it brings against its targets. Finra's proposal would allow it to do the same.
“The problem is that Finra brings far more actions” than the SEC, said David Gehn, a member at Gusrae Kaplan Bruno & Nusbaum PLLC.
“With Finra, the net is much broader,” Ms. Scott agreed, with more “investigations focused on misconduct that is relatively minor.”
Finra said in its filing that it will accompany disclosure of complaints with a “statement that alerts recipients that the alleged violations … have not resulted in a decision or finding against the respondent.”
The self-regulator also wants to continue its ability to publicize any complaint “where there is a significant policy or investor-protection reason to do so.”
Nancy Condon, a Finra spokeswoman, declined comment.
