April 15, 2009
Deputy Secretary, Securities and Exchange Commission 100 F Street, NE Washington, DC 20549
I am an insurance agent, financial advisor and attorney who has spent many years in both the financial services and legal arena. I have significant concerns about certain aspects of FINRA's proposal to revise Forms U4 and U5. I am very concerned with the 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. 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 violates the very essence of our legal system, the ability to obtain due process under our laws. As it has been stated, you cannot "unring a bell". This method of allowing arbitrary and vague implications against a financial advisor, who has no forum to defend themselves, doesn't necessarily fulfill the intent of strengthening the regulations on financial advisors. What comes to mind are the varying abuses that could be perpetrated by allowing such loose allegations to be made public. Unhappy clients who have market losses based on general market conditions, vindictive ex-spouses, angry neighbors, etc., all come to mind. If someone is allowed to allege violations without being bound by the parameters of a lawsuit or arbitration rules, how is this really going to be effective in establishing who is truly violating the standards and practices we are to uphold?
I must strenuously oppose the imposition of this "guilty before charged" standard which could result in my reputation and livelihood being irreparably damaged by unsubstantiated claims made in a proceeding in which I have not been named as a defendant or respondent. While I strongly believe that people who engage in unscrupulous or misleading sales practices should be aggressively prosecuted and subject to appropriate and meaningful sanctions, the SEC should not allow someone's reputation to be irreparably damaged by unproven claims or allegations made in a lawsuit or arbitration proceeding in which the individual has not been named as a party. Furthermore, a named party to a lawsuit or arbitration has an opportunity to refute the allegations against him and "clear his name." Someone who has not been named as a party in a lawsuit or arbitration does not have this same opportunity or ability, and any allegations made against him will likely go unanswered and unchallenged.
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.
Lori Susalla Oancea, J.D.