April 17, 2009
I am writing to express my concerns about FINRA`s proposal to revise Forms U4 and U5. As a financial advisor, I rely upon the good will I have established with my clients and my reputation in the community to build my business through referrals. However, this proposal will undermine my efforts to build a successful business by allowing my reputation to be harmed if unproven allegations contained in an arbitration or civil litigation claim in which I am not a named party are disclosed.
This is wrong for the client as it provides misleading, inconclusive information that cannot be withdrawn from clients` memory.
It is also fundamentally wrong to leave any person stand putblically, in effect, as guilty until proven innocent and especially when the person is not named but is assumed as possibly part of whatever.
As a simple matter of justice, financial advisors should be allowed to respond to unadjudicated allegations before having their reputation sullied through the reporting of these matters to the Central Registration Depository and made available to the public through FINRA`s BrokerCheck program. But under the proposal, "yes" answers to Questions 14I(4) and (5) on Form U4 and Questions 7E(4) and (5) on Form U5 would be reported to the public and securities regulators whether or not they have merit.
I believe FINRA should propose to end the reporting of all unsubstantiated claims of wrongdoing to the public and allow honest and decent financial advisors to retain their hard-earned reputations.
Therefore, I urge you to 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. David Shrom
Shrom Associates/FSC Securities Corporation