FINRA Issues Notice Regarding Confidentiality Agreements in Customer Disputes (FINRA Reg. Notice 14-40)

FINRA issued a regulatory notice regarding confidentiality provisions in settlement agreements and the arbitration discovery process.

The regulatory notice reminds firms that it is a violation of FINRA Rule 2010 ("Standards of Commercial Honor and Principles of Trade") to add to settlement agreements or any other documents any confidentiality provisions, including confidentiality stipulations made during a FINRA arbitration proceeding, that prohibit or restrict a customer or any other person from communicating with the SEC, FINRA, or any federal or state regulatory authority regarding a possible securities law violation.

Additionally, FINRA cautioned firms that the use of confidentiality provisions in discovery stipulations that prohibit or restrict a customer or other person's ability to communicate directly with or in response to an inquiry from a regulatory authority constitutes conduct that is inconsistent with just and equitable principles of trade and may result in disciplinary proceedings by FINRA for violation of FINRA Rule 2010.

See: FINRA Regulatory Notice 14-40.