April 27, 2009
Florence Harmon
Deputy Secretary, Securities and Exchange Commission 100 F Street, NE Washington, DC 20549
Florence Harmon:
I am an insurance agent and financial advisor. I was also a member of the California Bar Association for 14 years specializing in securities law as in-house counsel for an insurance marketing firm. Over the course of my 25+ year career in the insurance business I have had a wide variety of opportunities and experiences which I believe make me qualified to respond to this issue. For the most part I have been in agreement with the quantity and quality of disclosures currently required by the SEC and FINRA in U-4 and U-5 forms/filings. In general, the philosophy of full disclosure in securities practices is healthy and important. Without full disclosure a seemingly uninterested party would not have access to the proper information upon which to make an informed choice.
However, I am writing to express significant concern that part of the proposal that would revise Forms U4 and U5 to essentially require the reporting of allegations of sales practice violations made against a registered person that are contained in the body of an arbitration claim or lawsuit in which that person is not named as a party. In other words, a person would have to report allegations of sales practice complaints made against that person as long as the person was either named in or could be identified from the body of the claim, even if the person is not a party to the lawsuit or arbitration proceeding.
This would place an onerous burden on one who may be entirely innocent of any wrongdoing. Furthermore, how does one know whether one's name has been used in connection with an arbitration or lawsuit if one is not a party to it? This then could become an impossible standard with which to comply. It is akin to saying that one must be prepared to defend oneself against any and all claims made against oneself regardless of their source or origin. Taken to an extreme, you can see how this would be very disruptive to one's ability to earn a decent and fair livelihood.
I therefore request that you not approve that part of FINRA's proposal that would require the reporting of allegations of sales practice violations made against a registered person that are contained in the body of an arbitration claim or lawsuit in which that person is not named as a party. Thank you for considering my comments.
Sincerely,
Doug Richards