SIFMA Responds to FINRA Proposed Rule Change - Rule 8313 (the "Proposal")

Commenting on a FINRA rule proposal, SIFMA recommends that FINRA Rule 8313, which governs the release of disciplinary and other information by FINRA to the public, be amended to provide for the public disclosure of a failure by a member or associated persons of a member to pay an arbitration award to an industry claimant. Currently, FINRA Rule 9554 allows for the suspension or cancellation of membership or a suspension from associating with any member when a member or associated person fails to comply with an arbitration award or settlement agreement related to arbitration or mediation. The inability of the member or associated person to pay any such award, however, may be offered as a defense to any such action involving a failure to pay an industry claimant. The inability to pay defense cannot, however, be offered in an action involving a customer complainant. As a result, failures to pay customer claimants are likely to result in a cancellation or suspension, which will be publicly disclosed in accordance with FINRA Rule 8313. By contrast, a failure to settle an industry award is unlikely to result in a cancellation or suspension and, therefore, is unlikely to be disclosed pursuant to FINRA Rule 8313. Short of eliminating the ability to pay defense entirely from FINRA Rule 9554, SIFMA believes that FINRA should amend proposed Rule 8313 to provide for public disclosure where a member or associated persons has successfully raised the inability to pay defense and, thereby, avoided a cancellation or suspension.

View letter in full here (links to PDF).See also: Text of Proposed Rule Change.