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New FINRA Regulatory Notice
Confidentiality Provisions in Settlement Agreements and the Arbitration Discovery Process


Pursuant to FINRA's recently published Regulatory Notice 14-40, member firms are being reminded that confidentiality provisions in settlement agreements between member firms and employees and/or customers "cannot be used to prohibit or restrict an individual from initiating communications directly with FINRA or other securities regulators regarding the settlement terms or underlying facts of a dispute, regardless of whether the individual has received an inquiry from such regulatory authority regarding the dispute."


The Regulatory Notice goes on to state that confidentiality provisions must be drafted so that employees/customers have the authority, without restriction or condition, to speak with FINRA representatives. While most settlement agreements contain confidentiality clauses, many place these prohibited restrictions on settling parties.  In the Regulatory Notice, FINRA provides an "example" of an acceptable confidentiality provision in a settlement agreement:


"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."


The Regulatory Notice warns that failure to provide this type of broad carve-out in settlement agreements could place firms at risk of violating FINRA Rule 2010 (Standards of Commercial Honor and Principles of Trade) and lead to disciplinary proceedings.  



What Should Employers Do?  


We recommend that you revisit your form settlement agreements
to ensure that the confidentiality provisions contain carve-outs similar
to the example listed in the Regulation.

CLICK HERE to review the full 14-40 Regulatory Notice.


Nukk-Freeman & Cerra, P.C. is available to  

assist you in reviewing your settlement agreements.


Please contact Katherin Nukk-Freeman or the 

NFC attorney with whom you normally work for assistance. 

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