July 12, 2013
The purpose of this letter is to provide the Securities and Exchange Commission with comments on the above referenced proposed rule change which was filed by the Financial Industry Regulatory Authority, Inc. (FINRA) on June 21, 2013.
I am an attorney whose practice is exclusively devoted to the representation of individual and institutional investors in their disputes with the securities industry. Moreover, I am a former President and current Director Emeritus of the Public Investors Arbitration Bar Association (PIABA), am the former Chairman of FINRAs National Arbitration and Mediation Committee (NAMC), am the current Chairman of FINRAs Discovery Task Force Committee (DTFC) and am a former member of the Securities Investor Protection Corporation (SIPC) Modernization Task Force.
With respect to proposed FINRA Rule 3110(b)(5), it is my understanding that this rule modification would require a members supervisory procedures to include procedures to capture, acknowledge and respond to written (including electronic) customer complaints, but would specifically exclude the continuation of similar procedures in connection with oral (verbal) customer complaints.
As explained in the subject rule filing, FINRAs stated rationale for the exclusion of oral (verbal) customer complaint procedures is the belief that oral (verbal) complaints are difficult to capture and assess, and they raise competing views as to the substance of the complaint being alleged. Consequently, oral complaints do not lend themselves as effectively to a review program as written complaints, which are more readily documented and retained.
With all due respect, this rationale is misguided for the reasons set forth below.
First, it defies common logic for FINRA to state that oral (verbal) complaints are too difficult to capture and assess when firms that are members of the New York Stock Exchange, which includes all of the major broker-dealer firms, have been required to capture and assess oral (verbal) complaints for a number of years.
Second, the exclusion of oral (verbal) complaints from the proposed rule ignores the fact that a substantial majority of broker-dealer firms, including FINRA member firms, provide guidance to their customers that, if they have a complaint about their account or their registered representative, they should immediately call their registered representative, his or her supervisor and/or the compliance department of the firm.
Third, the exclusion of oral (verbal) complaints from the proposed rule ignores the fact that the SEC, itself, advises customers that, if they have a complaint about their account or their registered representative, they should promptly talk to their financial professional and that if their financial professional cant resolve your problem, then the customer should then talk to the financial professionals supervisor. See, e.g., Questions You Should Ask About Your Investments ... and What To Do If You Run Into Problems, available at, http://www.sec.gov/ investor/pubs/askquestions.htm.
Fourth, the exclusion of oral (verbal) complaints from the proposed rule ignores the fact that FINRA, itself, provides similar guidance to investors if they have a complaint about their account or their registered representative – if you believe you have been subjected to unfair or improper business conduct by a securities professional, FINRA encourages you to voice your concerns. See, e.g., Investors Best Practices, available at, http://www.finra. org/investors/protectyourself/beforeyouinvest/avoidcommoninvestorproblems/.
Finally, the exclusion of oral (verbal) complaints from the proposed rule ignores the fact that a substantial majority of customer complaints are, in fact, oral (verbal) complaints which mandates that, in the pursuit of effective regulation and investor protection, oral (verbal) complaints must be captured and documented.
Thank you for providing me with the opportunity to comment on this rule filing and your consideration of the comments set forth above.