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Wednesday, April 25, 2007

The U-5 Defamation Campaign Continues…

As we continue our campaign to persuade the NASD to revisit a rule originally proposed in 1998 known as “NASD Notice to Members 98-18,” that would have given securities firms a qualified privilege to information inserted into a departing employee’s Form U-5, I draw your attention to this letter I recently submitted to Jean I. Feeny, Associated Vice President and Chief Counsel in charge of the NASD’s Dispute Resolution department.

We aim to counter the recent Rosenberg v. MetLife decision, which established an absolute privilege standard in New York, by engaging the financial regulators directly. In addition to our online petition, this letter establishes that an absolute privilege standard not only is harmful to brokers and employees of securities firms, but to individual investors as well.

Significantly, I also point out that the opponents to the qualified privilege standard, namely the Securities Industry Association (SIA) and the Securities Industry and Financial Markets Association (SIFMA), in fact, supported the 1998 rule! You can view their original comment letter establishing their position here. As many parents would say of their unruly children, “give ‘em an inch and they’ll take a mile.”


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