April 21, 2009
I am writing to express my deep concerns about FINRA`s proposal to revise Forms U4 and U5. I have been in this industry for almost 24 years. During that time I have worked as a financial advisor,and for a shorter period as a registered principal. In my experience, the vast majority of the registered representatives I have had the pleasure to meet over these many years have consistently put the best interests of their clients first. They have continually worked hard at serving their clients` needs and best interests. These advisors have worked hard on developing the good will with their clients and a solid reputation in their community which is necessary to build a successful business through referrals. Our mutual desire to build successful businesses, and maintain good client relationships, offers a strong incentive to make the achievement of our clients` investment objectives our primary goal. However, this proposal will undermine our efforts to build a successful business by allowing our reputations to be harmed by unproven allegations contained in an arbitration or civil litigation claim in which we are not a named party. This is absolutely unfair andunacceptable.
The cold reality is that each and every day there are ads flooding television, radio, and the print media, making the simple statement: If you lost money in the market, you may be entitled to damages. As a simple matter of fairness, financial advisors should be allowed a meaningful opportunity 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 am aware that there are other situations under the current rules that require mere allegations contained in written customer complaints to be shared with the public and the regulators. However, I vigorously disagree with FINRA`s conclusion that this current injustice should be extended to arbitrations and litigation that fail to name the financial advisor as a party. Instead, 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. James Rice
Royal Alliance Associates