The Financial Industry Regulatory Authority Inc. is thinking of giving up its proprietary lock on BrokerCheck information. This would allow for greater examination of a broker’s disciplinary data, including regulatory and arbitration actions, as well as customer complaints. The SRO is currently seeking public comment on this matter through April 6.
Opening up access to BrokerCheck data would allow commercial users to make the reports, known for being pretty dense, friendlier for users. (Some people have said that the information available is “convoluted” and uses language that can be hard for an investor to comprehend.) This could help investors more easily find information about a broker. Also, vendors might be able to establish comparison data and some complaint data on the firm-level could become accessible.
Up until this point, FINRA has been protective about keeping its disciplinary information confidential. Not only has it prevented the automatic downloading of the BrokerCheck database, but also, this information has only been available through one-off data requests by individuals.
Critics of FINRA’s closed door policy have said these limitations protect the financial industry by keeping embarrassing information about firms and brokers private. While this has allowed financial advisers with numerous complaints against them to keep such secrets quiet, invaluable information, such as whether one broker has received more complaints than another, ends up not becoming known. The SRO, however, maintains that it hasn’t been shielding the industry with its BrokerCheck restrictions.
One reason that FINRA is considering making its BrokerCheck data more easily accessible is because it has been under pressure to merge the database’s search results with the Investment Adviser Public Disclosure database. IAPD data is pubic information and can be downloaded automatically. (Last year, FINRA considered putting the two systems together into one database to be made public but now says it is more practical to keep them separate.)
It wasn’t until recently that FINRA was the only regulator to have an online tool that let investors look into the backgrounds of members of the financial services industry. It was in 2010 that the Securities and Exchange Commission widened the IAPD database to include not just investment advisor firm information, but also data about IA representatives.
Last year, as mandated by Dodd-Frank’s Section 919B, the Commission put out a study and recommendations on how to better investor access to information related to broker-dealer and investment adviser registration. AdvisorOne reports that to improve how investors can better access this type of data, the SEC is recommending that search findings for it and the IAPD databases be unified, zip code and other location indicator-related searches be implemented, and educational content to help investors navigate any unfamiliar term definitions or links be included. Dodd-Frank wants these recommendations implemented soon, and FINRA plans to have this completed by the July deadline.
FINRA to Restructure BrokerCheck, Giving Investors More Power, AdvisorOne, March 2, 2012
Finra may give up lock on BrokerCheck, InvestmentNews, March 1, 2012
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FINRA Says Charles Schwab Corp. is Making Customers Waive Right to Pursue Class Action Lawsuits, Stockbroker Fraud Blog, February 8, 2012
Merrill Lynch, Pierce, Fenner & Smith Ordered to Pay $1M FINRA Fine for Not Arbitrating Employee Disputes Over Retention Bonuses, Institutional Investor Securities Blog, January 6, 2012
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