The SEC fined Nationwide Planning Associates $240,000 for asking brokerage customers to sign confidentiality agreements that, according to regulators, were designed to prevent the investors from potentially communicating with the SEC and other regulators about possible misconduct. It is unlawful for a firm to put into place confidentiality or non-disclosure agreements that would serve to deter representatives or clients from serving as whistleblowers in the event of brokerage misconduct.
Some of the agreements Nationwide wanted customers to sign included explicit prohibitions on reporting disputes or violations of securities law to the SEC or other state and local regulatory agencies, according to the report.
The report indicates that the terms of some agreements required customers "forever refrain" from reporting potential misconduct to regulators, which violates whistleblower rules and protections included in the 2011 Dodd-Frank Wall Street Reform and Consumer Protection Act.
The SEC also named NPA Asset Management and Blue Point Strategic Wealth Management, which are affiliates of Nationwide Planning Associates, as violators of the whistleblower rule, stressing that a firm attempting to prevent a customer from filing a complaint with the SEC or other regulatory agency is expressly unlawful.
Claims against brokerage firms and investment advisers often settle before trial or arbitration (although every case is different). When a case settles, the financial services firm insists on a confidentiality agreement requiring the investor to keep secret the dispute, its settlement, and information learned during the dispute. Firms cannot require the investor to refuse to communicate with law enforcement or regulators and also cannot prevent the investor from initiating communications with law enforcement or regulators. Nonetheless, some firms and counsel cross the line in hopes of avoiding additional regulatory scrutiny.
If you invested with Nationwide Planning Associates or with any investment adviser or broker who has improperly attempted to prevent you from reporting wrongdoing, fraud, or other violations of securities laws and regulations, resulting in damages or losses due to continued misconduct, please call an experienced FINRA arbitration attorney at The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.