FINRA Addresses Confidentiality Provisions In Notice 14-40

Securities Law Blog

In  FINRA Regulatory Notice 14-40, members are cautioned that it is a violation of FINRA Rule 2010- Standards of Commercial Honor and Principles of Trade- to incorporate confidentiality provisions into settlement agreements where the provisions seek to restrict or prohibit a customer or other person from reporting and/or communicating with the Securities and Exchange Commission (the “SEC”), FINRA, or any federal or state regulatory authority regarding possible violations of the securities laws.

FINRA previously addressed the use of confidentiality provisions in settlement agreements in its Regulatory Notice 04-44  issued in June 2004.

FINRA Notice 14-40 goes further than FINRA’s prior guidance in Notice 04-44 and specifically targets agreements designed to silence whistleblowers.

In Notice 14-40 FINRA cautions firms that a confidentiality provision cannot prevent a person from initiating communications directly with a regulator regarding the underlying facts of a dispute or a settlement regardless of whether the individual has received an inquiry from a regulator regarding the dispute.  According to FINRA, an individual, including a party to an ongoing dispute may notify FINRA or the SEC of a possible securities law violation at any time even if a confidentiality provision provides otherwise.

In that respect, it is the position of FINRA that a confidentiality provision should expressly allow a party to initiate direct communications with, or respond to an inquiry from, a regulator including but not limited to the SEC or FINRA.

FINRA provided the sample language of such a clause below.

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.

FINRA Notice 14-40, also warns firms that a provision requiring the non-disclosure of documents outside of an arbitration case does not apply to the providing of information and ocuments with a regulator.  The notice also states that confidentiality provisions in a discovery stipulation restricting a party’s ability to communicate directly with or in response to an inquiry from a regulatory authority violates FINRA Rule 2010.

Notice 14-40 reflects FINRA’s efforts to prevent whistleblowers from being silenced during arbitration proceedings.  Accordingly, member firms should ensure that the confidentiality provisions in their settlement agreements and discovery stipulations do not contain language seeking to limit a person’s ability to contact and provide information to regulatory authorities concerning possible violations of the securities laws.

For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton, Florida, (561) 416-8956, by email at [email protected] or visit   This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute, legal advice on any specific matter, nor does this message create an attorney-client relationship.  Please note that the prior results discussed herein do not guarantee similar outcomes.

Hamilton & Associates 
Brenda Hamilton, Going Public Lawyer
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