Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Thursday, April 24, 2008

FINRA Proposes Rule Change Regarding Complaints of Brokers'Sales Practices

FINRA is seeking comment on proposed rule amendments that would require registered firms - for the first time - to report allegations of sales practice violations against an individual broker made in arbitration claims that do not name the broker as a respondent.  Under current practice, firms are required to report customer allegations against a broker in an arbitration claim only if the legal document specifically names the broker as a respondent. A settlement or ruling resolving the allegations also need not be reported if the broker is not named as a respondent. Increasingly in recent years, claimants and their lawyers have been naming only the firm in arbitrations; as a result, neither the allegations of sales practice violations made against the unnamed brokers nor the dispositions of those proceedings are reported to CRD.

Currently, customer complaints and settlements involving an amount of $10,000 or more are reportable to CRD, a threshold that has been in place for years without being adjusted for inflation. FINRA is proposing raising that threshold to $15,000 to more accurately reflect today's business conditions.

FINRA will be accepting public comments on the proposals for 30 days, or until May 27.

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