April 16, 2009
Subject: File No. SR-FINRA-2009-008
From: James D. Keeney, Esq., Sarasota, Florida
Affiliation: James D. Keeney, P.A. (Law firm representing public investors)
As an attorney who has represented the interests of public customers in disputes with securities brokerage firms and their registered representatives and associated persons since the early 1990's, I strongly support the above-referenced proposed rule relating to information required on Forms U4 and U5.
This proposal would close a significant loophole in reporting requirements that has allowed brokerage firms to hide many if not most of the complaints made by their customers about "rogue" stockbrokers, to the great detriment of my clients and other public investors---especially elderly retired investors who tend to be more trusting.
At present, even in the most egregious cases, there is no requirement that the broker-dealer report any customer complaint against a registered rep to the CRD system unless the customer names the rep as a respondent on a statement of claim. Thus, even though the broker is identified by name and CRD number in the body of the statement of claim and even though the sales practice violations committed by the broker are clearly set forth, a concerned prospective customer who diligently searches the broker's CRD data on the FINRA web site can never know that other customers have complained about the prospective broker. Indeed, the CRD system presently operates to affirmatively mislead customers, since it often returns a "clean" record when, in fact, there have been multiple customer complaints that were never reported.
As an attorney, I often cannot name the individual registered rep in my cases for various strategic and legal reasons, even when the broker is clearly at fault for the losses. Unfortunately, under the current system the investing public has no way to learn of the clearly stated allegations in such complaints even if the firm has already settled for a substantial amount at the critical time when they decide to open their customer accounts.
Repeatedly, my clients have been amazed to discover for the first time during arbitration investigation and discovery that their broker was the subject of multiple customer complaints---sometimes for the very same misconduct---even though they had diligently checked the NASD web site before opening their accounts and found "no complaints." Customers are entitled to know if a prospective broker has a history of customer complaints, whether the allegations have been proved in a formal proceeding or not.
This is a regulated industry, and nothing of relevance should be hidden from customers. I cannot think of a more relevant fact than the fact that other customers have complained about alleged broker misconduct. This is a matter where any concerns for broker "privacy" or the possible unfairness of repeating unsubstantiated allegations must give way to the far more important right of the customers to know what has been alleged about a regulated individual, so that they can make appropriate inquiries before entrusting their life savings to someone who may not be worthy of such trust.
This rule will be an important step to increase the transparency of the American financial system to the ultimate benefit of all participants.
James D. Keeney, Esq.
James D. Keeney, P.A.