FINRA Proposal Is Unfair: NAIFA

The proposed change regarding arbitration or litigation involving persons registered with FINRA would require the reporting of allegations of sales practices complaints even if the registered person were not named in the arbitration claim or civil complaint as a respondent or defendant, Sanders writes.

One problem is that the requirement would reduce consumers’ confidence in the reliability of the complaint records, by cluttering the records with unsubstantiated information, Sanders writes.

Another problem, Sanders writes, is that persons not named in an arbitration or court proceeding typically have no opportunity to defend themselves or attempt to refute the allegations, Sanders writes.

Because the allegations likely will go unanswered, “the damage has been done even if the claim is completely frivolous,” Sanders writes.