Since 2004, FINRA has required its member firms to include in settlement-agreement confidentiality clauses an exception expressly allowing a customer to respond to regulatory inquiries. See Notice to Members 04-44.
FINRA recently updated that requirement to include express permission to be a whistleblower. FINRA's suggested language provides: Any non-disclosure provision in this agreement does not prohibit or restrict you (or your attorney) from initiating communications directly with, or responding to any inquiry from, or providing testimony before, the SEC, FINRA, any other self-regulatory organization or any other state or federal regulatory authority, regarding this settlement or its underlying facts or circumstances. See Notice to Members 14-40 (Oct. 9, 2014).
The Notice also extends the regulatory-response and whistleblower requirements to confidentiality stipulations during discovery in FINRA arbitrations. Failure to include these exceptions to confidentiality provisions may violate FINRA Rule 2010 "just and equitable principles of trade." The Notice is here
. Thomas K. Potter, III
) is a partner in the Securities Litigation Practice Group at Burr & Forman, LLP. Managing Partner of the Nashville office, Tom is licensed in Tennessee, Texas and Louisiana. He has over 28 years' experience representing financial institutions in litigation, regulatory and compliance matters. © 2014 by Thomas K. Potter, III (all rights reserved)