NASAA Applauds Proposed Amendment to Require Disclosure of Allegations Against Brokers in Arbitrations and Civil Lawsuits

WASHINGTON, D.C. (April 29, 2008) – The North American Securities Administrators Association (NASAA) today said a rule amendment recently proposed by the Financial Industry Regulatory Authority (FINRA) would enhance investor protection by improving disclosure of investor allegations of sales practice violations by brokers in securities arbitration claims and civil lawsuits.

“We applaud the joint efforts of the states and FINRA, working with the securities industry, to produce this important proposal, which will help protect investors from unscrupulous brokers,” said Karen Tyler, NASAA President and North Dakota Securities Commissioner.

“If adopted, this proposed rule would represent a significant step forward in investor protection because it provides better information about brokers to investors, regulators, and the securities industry,” Tyler said.

Under the proposed amendment, registered brokerage firms would be required to report to the Central Registration Depository (CRD) on Forms U4 and U5 allegations of sales practice violations against an individual broker made in arbitration claims or civil lawsuits in which the broker is not named as either a respondent or defendant. The proposal seeks to change a current FINRA rule that requires firms to report such allegations only if the broker is specifically named as a respondent in arbitration claims or civil lawsuits.

“Under the current reporting system, important information about individual brokers is not being made available to regulators or prospective broker-dealer employers, and most importantly, to the investing public,” Tyler said.

Tyler said NASAA will file additional comments on the proposed rule amendments during the public comment period, which ends May 27.

NASAA is the oldest international organization devoted to investor protection. Its membership consists of the securities administrators in the 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, the provinces and territories of Canada, and Mexico.

For more information:
Bob Webster, Director of Communications
202-737-0900

2008 Headlines, Newsroom