Investor Advocacy Clinic Comment Highlights Importance of Protecting Investors’ Confidential Information

The  Investor Advocacy Clinic is dedicated to protecting investors’ interests. One way in which we accomplish this is by closely monitoring rule changes that may affect individual investors.

FINRA periodically revises its arbitration rules to update or improve the arbitration process. Before any new rules or changes to rules may be adopted, the proposed rule is provided to the public for comment. Comments are reviewed and taken into consideration when deciding whether to modify an existing rule or adopt/reject a new rule. As such, the Investor Advocacy Clinic endeavors to participate in this critical process to protect investors.

The Proposal: SR-FINRA-2014-008

FINRA proposal SR-FINRA-2014-008 suggests changes to how confidential investor information is handled in certain aspects of arbitration proceedings. The changes include requiring parties to redact or remove parts of personal identifiers, such as social security numbers, and gives investors thirty days to correct redaction mistakes and resubmit properly redacted versions.

The Clinic’s Comment

On March 14, 2014, the clinic submitted its comment on the proposed rule change. Overall, the clinic expressed support for the proposal’s goal, but recommended broadening the rule to cover more confidential information in every situation where investors’ confidential information is being exchanged. Federal courts have similar rules requiring the redaction of sensitive information and the proposed rule change seeks to move FINRA proceedings in the same direction, though the clinic noted the FINRA proposal could go further, mirroring the protections available in federal courts. The clinic feels our proposed additions will better protect investors’ personal information.

Protecting investor information is important to the clinic, and we will continue to submit comments to other rules that impact investor interests.

The primary student author, Natalya Nemtseva, was assisted by student interns Timothy Guilmette and Thomas Abrahamson in drafting the clinic’s comment.