The Financial Industry Regulatory Authority (FINRA) recently issued a regulatory notice regarding the use of confidentiality provisions in settlement agreements.
It specifically reminds firms that FINRA Rule 2010 prohibits provisions that restrict or preclude a customer or any other person from communicating with the Securities and Exchange Commission (SEC), FINRA, or any federal or state regulatory authority regarding a possible securities law violation.
According to the FINRA, its intent is not to preclude securities industry firms from entering into settlement agreements that include confidentiality provisions. Rather, it wants to ensure that agreements are written to expressly authorize, without restriction or condition, a customer or other person to initiate direct communications with, or to respond to, any inquiry from, FINRA or other regulatory authorities.
The notice provides the following 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.
FINRA’s guidance also highlights that confidentiality provisions relating to document production in the FINRA arbitration discovery process do not apply to the sharing of the documents with regulatory authorities. Moreover, the use of confidentiality provisions in discovery stipulations that prohibit or restrict a customer’s or other person’s ability to communicate directly with or in response to an inquiry from a regulatory authority may also violate Rule 2010.
Given the increased scrutiny by FINRA and the SEC, financial firms should review the non-disclosure provisions of their confidentiality agreements to ensure compliance. The failure to do so could lead to a costly violation.
If you have any questions about this post or would like to discuss your settlement agreements, please contact me or the Scarinci Hollenbeck attorney with whom you work.
Fort Monmouth Redevelopment and the Transformation of Monmouth County Real Estate
The Fort Monmouth redevelopment has entered its execution phase, and it is repositioning the broader Monmouth County real estate market. When Netflix and the Fort Monmouth Economic Revitalization Authority closed on the 292-acre Mega Parcel in December 2025, the transaction did more than hand over a deed. It marked the moment Fort Monmouth stopped being […]
Local Zoning and Land Use Rules Every New Jersey Rental Property Owner Should Understand
Owning a residential rental property in New Jersey involves more than finding tenants and collecting rent. Property owners must comply with a combination of state laws, municipal ordinances, building and housing codes, and zoning and land use regulations. These requirements can affect everything from the number of dwelling units permitted at a property to whether […]
Real Estate Litigation Explained: Top 5 Disputes and How to Avoid Them
The five most common real estate disputes are breach of contract claims, landlord-tenant conflicts, zoning and land use disagreements, construction claims, and boundary disputes. Understanding why each arises, and taking preventive steps early, can help property owners, tenants, developers, and investors avoid costly litigation. Key Takeaways: Real estate transactions are complex endeavors involving numerous parties […]
When a Child Turns 18: The Gap in Your Family’s Estate Plan
Once a child turns 18, parents lose the automatic legal authority to make medical and financial decisions on their behalf, even if the child still lives at home or remains on the family’s insurance. Three documents close that gap: a durable power of attorney, a health care proxy or directive, and a HIPAA authorization. For […]
Business Mediation: An Overview and Practical Tips
Business mediation is a confidential, voluntary process in which a neutral third party helps companies negotiate a resolution to a commercial dispute without going to trial. Because working with a mediator is very different from litigating in the courtroom, it is important to understand how commercial mediation works, when it makes sense for your dispute, […]
Top 5 Causes Leading to Construction Defect Litigation
The five most common causes of construction defect litigation are design defects, substandard materials, workmanship defects, code violations, and subsurface defects. Because these flaws can compromise a building’s integrity, functionality, or safety, they frequently lead to disputes involving multiple parties and high financial stakes. Key takeaways: What is Construction Defect Litigation? Construction litigation is complex, […]
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Sign up to get the latest from our attorneys!
Explore What Matters Most to You.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.
Let`s get in touch!
Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!
