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Articles Tagged with Investor protection

SEC’s Regulation BI May Not Be Protecting Investors The Way They Think 

It has been nearly seven months since the SEC’s Regulation Best Interest (BI), a rule mandating that brokers NOT market themselves as financial advisors unless they actually are dually registered to be one, went into effect. The aim of this distinction is to let investors know whether they are working with someone who is bound to act in their best interests or not.  

While brokers are supposed only to recommend financial products to customers that are suitable for them, this recommendation can also be based on what product will earn them the highest commission. This potential conflict of interest can be financially disadvantageous to an investor.

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.

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