April 10, 2009
I am writing to express my deep concerns about FINRA`s proposal to revise Forms U4 and U5. As a financial advisor, I rely upon the good will I have established with my clients and my reputation in the community to build my business through referrals. My desire to build a successful business offers a strong incentive to make the achievement of my clients` investment objectives my primary goal. However, this proposal will undermine my efforts to build a successful business by allowing my reputation to be harmed by unproven allegations contained in an arbitration or civil litigation claim in which I am not a named party. This is absolutely unacceptable.
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. The unprecedented times we`ve been in globally from both a capital markets and economic perspective only serve to highlight the importance of my thesis, given the acceleration of activity in certain corners of the legal community where a "business" has been created to encourage certain investors to go after their financial advisor, many of whom had impeccable records to that point and in most cases, acted with prudence and long term historical investment integrity. Are we as an industry destined to follow the bleak and bloodied pathways of the medical profession, where otherwise fine physicians are leaving the profession in droves as they`ve fallen prey to those with a "gold-digger" mentality? Where an advisor has clearly been in violation of accepted standards of conduct, he/she should be appropriately acknowledged but surely not before. Is he/she not FULLY innocent before being found guilty and with no adverse implications attached before being found guilty? The mere mention of possible impropriety tarnishes the innocent for that is the way, like it or not.
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 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. Alan Freedman
Geronimo Financial, LLC