SEC Seeking Comments on FINRA’s Proposal to Permit Disclosure of FINRA Disciplinary Complaints
The Financial Industry Regulatory Authority (“FINRA”) has filed a proposed amendment to FINRA Rule 8313 (Release of Disciplinary Complaints, Decisions and Other Information) with the Securities and Exchange Commission (“SEC”). The SEC, in turn, has published the proposed rule change for comment.
FINRA Rule 8313 governs the public disclosure of disciplinary actions by FINRA. Currently, FINRA is severely limited as to what it can disclose to the public via its online disciplinary action reporting system. Oftentimes though, the disciplinary information that FINRA is prohibited from disclosing is reflected on the firm or associated person’s BrokerCheck report in summary fashion, because of Form U-4 reporting requirements. FINRA aims to correct this inconsistency with the proposed amended rule, so that the information is available on FINRA’s website, as well as on the BrokerCheck system.
Currently, FINRA is permitted to release a disciplinary complaint or disciplinary decision issued by FINRA, only upon specific request. In limited circumstances, FINRA is allowed to publish disciplinary information that is of significant public interest. In either case, FINRA is required to redact the names of the parties and other identifying information. The proposed amendment to Rule 8313 would allow FINRA to release disciplinary complaints and decisions issued by FINRA to the general public in an unredacted form, subject to certain exceptions.
In its filing, FINRA states that giving the public greater access to detailed information regarding disciplinary actions can serve to deter and prevent future misconduct and improve overall business standards in the securities industry. It will also permit investors to consider the disciplinary records of a financial advisor when considering whether to do business with him or her.
FINRA stated that it will include a statement with each disclosure of a disciplinary complaint that “the alleged violations have not resulted in a decision or finding against the respondent.” The SEC posts most complaints it files on its website. FINRA wants the ability to do the same.
The SEC release and proposed rule can be found here.