Dear Sir or Madam:
Regarding the proposals in File Number SR-FINRA-2009-008, I disagree with the item (listed as bullet point 3 in the FINRA Executive Representative Request for Comment section of the e-mail dated 4/15/09) that reads; "requires firms to report allegations of sales practice violations made against a registered person in an arbitration or litigation in which that person is not named as a party."
It seems logical that if a person in a litigation or an arbitration wishes to allege that a registered person has made a sales practice violation, that that registered person should have been named as a party. Since parties in both arbitration and litigation hire attorneys to represent them, and exacting and complex pleadings and other documents are written and used in these proceedings by those attorneys, that the facts of the complaint should be well laid-out prior to the parties appearing in court or at the arbitration table.
Which is why I believe that after that preparation, and those 'thought-out" allegations, that a complaining party can make an "out-of-the-blue" allegation about another party, which will then be required to be reported in a U-4 amendment, unfairly prejudices that named party. It is entirely conceivable that this "later-alleged party" could suffer the penalty of having a U-4 amendment that alleges a violation, and yet have no remedy if the parties named in the arbitration or litigation come to a conclusion. The allegation can lie unanswered by the litigation or the arbitration, yet remain on the registered person's U-4. It is one thing for the complaining party to make additional allegations during the course of the arbitration/litigation, it is another to allow unproven and/or unanswered allegations to damage the registered person.
I believe this requirement should be eliminated from SR-FINRA-2009-008, or otherwise altered to protect registered persons against the reporting of random verbal allegations.
I appreciate your consideration of these points.