April 16, 2009
I am writing to express my deep concerns about FINRA`s proposal to revise Forms U4 and U5. As a financial advisor, my practice is dependent upon the good will I have established with my clients and upon my reputation in the community to build my business through referrals. My desire to continue my successful business makes helping my clients reach their investment objective my primary goal; it is the reason I get up and go to my office everyday.
This proposal will thwart my efforts (and those of my peers) to build a successful business by allowing my reputation to be harmed by unproven and potentially unfounded allegations contained in an arbitration or civil litigation claim in which I am not EVEN a named party. This is absolutely unacceptable. If enacted, this rule change will lead to the besmirchment and/or ruin of the reputations of countless well-intended, hard-working, innocent professionals.
As a simple matter of fairness, financial advisors should be allowed a meaningful opportunity to respond to unadjudicated allegations before their reputations are sullied by the requirement to report unajudicated matters to the Central Registration Depository. Where else in our society is there a legal right or procedural requirment allowing the destruction of the personal reputations of persons whose names have never been mentioned in an arbitration case or a civil investigation? Does FINRA really want to go down this slippery slope?
I am aware that there are situations under the current rules that require mere allegations contained in written customer complaints to be shared with regulators and the public. However, I vigorously disagree with FINRA`s conclusion that this injustice should be extended to arbitrations and litigation that fail to name the financial advisor as a party. Instead, I believe FINRA should end the practice of reporting to the public ANY and ALL unsubstantiated claims of wrongdoing. Only in this manner can honest and decent financial advisors to retain their hard-earned reputations.
Before you vote on this issue, I urge you to place yourself in the position of a registered representative or principal who has worked hard to build a reputation worthy of respect. How would you justify the destruction of that public image on the basis of allegations of misconduct in which you are not even named? Do the right thing here; reject FINRA`s proposal to add Questions 14I(4) and (5) to Form U4 and Questions 7E(4) and (5) to Form U5. Thank you for considering my comments.
Mr. Steven W. Stambaugh