Finra board set to reconsider BrokerCheck website link

Rule would allow customers easier access to their brokers' profiles in the database

Feb 6, 2014 @ 12:26 pm

By Mark Schoeff Jr.

finra, brokercheck, brokers, regulation
+ Zoom

Finra next week plans to revive a proposal that would require brokers to include a link on their website and other online communications leading investors to their profile on BrokerCheck, a database which contains information about their disciplinary history.

The board is scheduled to consider the proposal at its Feb. 13 meeting.

The original rule was withdrawn last April after industry resistance. It isn't clear how the rule has been modified since then.

“The last one was too vague and too costly in terms of implementation and monitoring,” said Bryan Ward, a partner at Sutherland Asbill & Brennan.

The initial rule would have required Finra members to include a “prominent description of, and link to” the individual's BrokerCheck page, rather than its home page. Currently, brokers must provide to customers annually in writing the BrokerCheck hotline number and Finra website address.

Finra didn't make clear what “prominent” means or which social-media sites the rule covered, Mr. Ward said.

“They're going to have to work with the industry and get into the weeds, and come up with specific and workable guidance,” said Mr. Ward, who suggested a pilot program involving volunteer firms.

One of the problems with Finra's first attempt at the rule is that it failed to take into account the character and space limitations in social media that make it difficult to include the BrokerCheck link, said David Bellaire, executive vice president and general counsel of the Financial Services Institute.

“Fiinra's earlier proposal didn't sync with how our members are using these platforms to remain in contact with their clients,” said Mr. Bellaire, whose group represents independent broker-dealers and financial advisers. “The original proposal was impossible to comply with while using some of the common Internet communication tools like Twitter.”

Peter Chepucavage, general counsel at Plexus Consulting Group, wrote one of the two dozen comment letters that Finra received on the first proposal. He has concerns about the information in BrokerCheck and the regulatory burden that firms would face in adding links to their online presence.

“I don't like BrokerCheck because it discloses a lot of non-relevant materials,” he said. “Anytime you have to change your website, it involves costs, especially for small broker-dealers.”

It is likely that the Finra board will approve the new rule, which could cause brokers to try to remove disciplinary actions from their BrokerCheck pages, according to Mr. Ward.

“We could see an increase in expungement requests,” Mr. Ward said.

The Finra board will tackle expungement by considering a rule that would prohibit basing the settlements of customer disputes on the customer's agreement that the brokers' record be cleared. The board also will address the definitions of “non-public” and “public” arbitrators.

Nearly every brokerage customer agreement contains a clause that requires that disputes be settled through an arbitration process conducted by Finra, the industry-funded broker-dealer regulator.

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