February 24, 2015 Articles

FINRA and Regulatory Notice 14-40 Requirements

Firms are to explicitly advise parties to settlement and confidentiality agreements that they can initiate communications with regulators

By Dominick F. Evangelista, Regina Pepe Martorana, and Heather Murphy

On October 9, 2014, the Financial Industry Regulatory Authority (FINRA) issued Regulatory Notice 14-40, concerning non-disclosure provisions in FINRA arbitration confidentiality agreements and settlement agreements. While Notice 14-40 purports to be a “reminder” to firms as to the acceptable parameters of non-disclosure provisions used in FINRA arbitrations, it goes a step further than prior FINRA guidance. Firms are now required to explicitly notify signatories that confidentiality provisions do not limit their ability to initiate contact with regulators.  FINRA’s prior guidance on this topic was far more limited: It only required that confidentiality provisions state that they do not prevent a party from responding to a regulator upon inquiry.  Firms must now review their confidentiality provisions in light of this new guidance.

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