Members are strongly advised to review and correct without delay transaction agreements that contain confidentiality rules that prohibit or prevent clients or other persons from disclosing, upon request, the terms of the transaction or the facts underlying the dispute to the NASD or another financial markets authority, or that require the withdrawal of a pending complaint addressed to NASD or any other financial market supervisory authority. The Committee on Education and Health Policy has been submitted. Below is an example of notifying customers or other parties to correct prior settlement agreements that contain confidentiality clauses or withdrawal of inadmissible complaints: member companies should immediately review their transaction agreements and make the necessary changes to confidentiality clauses to ensure that they comply with Article III, Section 1, nasd rules of good practice, as stated above. In addition, a transaction may not be subject to the withdrawal of a complaint pending with the NASD or another supervisory authority, or to the granting by the customer of an affidavit rejecting or contradicting, wrongly or falsely, the factual allegations underlying the initial complaint. Recent NASD studies have shown that, despite repeated warnings, some members continue to use transaction agreements with customers and others that impede the investigation of the NASD and the continuation of NASD enforcement actions. In this context, some client members and other parties to resolution require them to agree in transaction agreements on overly broad confidentiality rules as a precondition for resolution. In addition, some companies require customers and others to withdraw pending complaints from the NASD or other supervisory authorities as a precondition to settlement, or to require customers or others to file affidavits or other statements that, wrongly or misleadingly, reject or contradict previous claims. Member companies and their associates are reminded that these practices constitute conduct inconsistent with fair and equitable principles of trade and contrary to Rule 2110.2 Beyond these comprehensive confidentiality clauses, transaction agreements used by companies to settle disputes with their customers or others are generally not a regulatory concern. Indeed, settlement agreements may require confidentiality in a different form than financial market authorities. However, an injuring confidentiality clause prohibits or prevents the client or any other person from communicating, upon request, the terms of the transaction (and the underlying facts of the dispute) to a financial market authority such as the NASD or from imposing conditions on such disclosure. In many cases, concordation agreements contain confidentiality clauses that require regulatory authorities to seek an injunction or subpoena or initiate other legal proceedings before the parties can disclose to the regulatory authority the terms of the transaction or the underlying facts of the dispute.
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