FINRA Arbitration Agreements Cannot Prevent SEC Whistleblowers from Communicating with the SEC
FINRA has issued a Regulatory Notice stating that settlement agreements, discovery stipulations, and other confidentiality agreements made during a FINRA arbitration proceeding cannot “prohibit or restrict a customer or any other person from communicating with the Securities and Exchange Commission (SEC) … regarding a possible securities law violation.” This statement is set forth in FINRA Regulatory Notice 14-40 (October 2014).
Notice 14-40 means that companies cannot use confidentiality agreements in FINRA arbitrations to prevent potential SEC whistleblowers from participating in the SEC whistleblower award program.
Notice 14-40 states that “For example, notwithstanding a confidentiality provision in a settlement agreement, the customer or any other person may, at any time … communicate directly with SEC staff regarding a possible securities law violation.”
Furthermore, the Notice requires that confidentiality agreements inform customers or others that they are specifically allowed to communicate with the SEC: “Confidentiality provisions in settlement agreements should be written to expressly authorize, without restriction or condition, a customer or other person to initiate direct communications with, or respond to any inquiry from, FINRA or other regulatory authorities.”
Notice 14-40 explicitly reminds firms that using confidentiality provisions in arbitration discovery stipulations or settlement agreements that prohibit or restrict someone’s ability to report a fraud to the SEC or another regulatory authority may result in FINRA bringing disciplinary proceedings against them.
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About the Pickholz Law Offices LLC
The Pickholz Law Offices LLC is a law firm that focuses on representing clients involved with investigations conducted by the U.S. Securities and Exchange Commission, FINRA, and other securities regulators.
The Pickholz Law Offices has represented employees, officers, and others in SEC whistleblower cases involving financial institutions and public companies listed in the Fortune Top 10, Top 20, Top 50, Top 100, Top 500, and the Forbes Global 2000. We were the first law firm ever to win an SEC whistleblower award for a client on appeal to the full Commission in Washington. Inside Counsel magazine named this achievement one of the five key events of the SEC whistleblower program. Examples of the Firm’s SEC whistleblower cases are available here.
In addition to representing SEC whistleblowers, since 1995 the Firm’s founder, Jason R. Pickholz, has also represented many clients in securities enforcement investigations conducted by the SEC, FINRA, the U.S. Department of Justice and US Attorney’s Offices, State authorities, and more. Examples of some of the many securities enforcement cases that Mr. Pickholz has been involved with are available here.
You can see what actual clients have had to say about The Pickholz Law Offices by going to the Client Reviews page on our website or by clicking here.
How to Contact the Pickholz Law Offices LLC
If you would like to speak with a securities lawyer or SEC whistleblower attorney, please feel free to call Jason R. Pickholz at 347-746-1222.
The Pickholz Law Offices remains open and will be fully operational through teleworking while we all grapple with this terrible pandemic. We hope that all of our clients, colleagues, friends, and their families remain safe and healthy. Our thoughts and prayers go out to everyone who has been affected by COVID-19.