Finra seeks to beef up use of BrokerCheck

Revives proposal that would require brokerages to link to regulator's database, including disciplinary background info

Feb 13, 2014 @ 12:28 pm

By Trevor Hunnicutt

Finra on Thursday advanced a revised proposal that would require brokerage firms to include a link on their websites and other online communications to BrokerCheck, the database that includes broker disciplinary records.

The Financial Industry Regulatory Authority Inc. would require brokerage firms to display links to BrokerCheck, “on any member firm's website that is available to retail investors” and, in many other cases, when a firm displays a broker's profile or contact information.

The rule proposal, which has moved to a public comment period, came as part of a trio of decisions by Finra's 24-member Board of Governors that could reshape how investor disputes with brokers are settled and publicly reported.

Finra has been looking to pass a rule that would more widely publicize BrokerCheck for more than a year.

At issue is more than an Internet hyperlink. The proposal reignites a contentious debate between brokerage firms and Finra, the regulator whose operations they finance. Many brokers consider BrokerCheck to be a scarlet-letter repository, presenting the public with a distorted picture of their professional lives and cataloguing years of marginal details and meritless grievances by clients.

But some groups have been pushing for more information to be disclosed on BrokerCheck, and say a clear and comprehensive disciplinary history helps consumers make an informed decision when choosing an adviser. Groups such as the Public Investors Arbitration Bar Association, which represent investors in litigation against brokers, say not enough consumers know that BrokerCheck exists.

David Neuman, a lawyer who represents investors at Stoltmann Law Offices, said the revised rule is good news.

“Just putting that info in the customer's hand will certainly be helpful, and maybe they'll think twice if their broker has a number of complaints or other remarks on his record,” he said.

In April, facing industry pressure, Finra withdrew a proposal that would have required Finra members to include a link to the individual's BrokerCheck page.

Some securities lawyers said the rule was too vague and costly to implement and monitor, saying that brokers could not, for instance, include a link to BrokerCheck in a Twitter post, given the platform's space limitations.

But the rule announced on Thursday did not mention including a link to an individual's BrokerCheck page, and it excluded “an online interactive electronic forum … such as a … Twitter feed.”

Bryan M. Ward, a partner at Sutherland Asbill & Brennan, said the rule is likely to increase compliance costs and requests for expungement, a process that erases brokers' disciplinary history from BrokerCheck.

“There's so many different media and so many different ways and it's ever changing, in terms of how brokers are communicating with clients,” he said. “Twitter is not anything like what it was five years ago.”

BrokerCheck tracks basic information about brokers, as well as records from disciplinary hearings, allegations of misconduct by clients and the result of arbitration or court cases relating to their work. Unless they are expunged, the records include allegations that were settled or dismissed.

Currently, brokers are required to provide to customers annually in writing the BrokerCheck hotline number and Finra website address.


What do you think?

View comments

Recommended for you

Featured video


The #MeToo movement and the financial advice industry

Attendees at the Women to Watch luncheon commend the #MeToo movement for raising awareness about the issue of sexual harassment and bringing women together.

Latest news & opinion

Stocks plunge, advisers tell clients to hang tight

Though planners encourage calm, some are preparing investors for a correction.

Lightyear Capital's Donald Marron said to be in the hunt for Cetera Financial Group

The veteran brokerage executive, who bought Advisor Group in 2016, owned Cetera once before.

What to watch for next with the DOL fiduciary rule

Much hinges on whether the Labor Department appeals the 5th Circuit decision by April 30.

Social Security benefits losing buying power

Low inflation combined with rising Medicare costs threaten the adequacy of seniors' income.

Finra looks to streamline broker-dealer exams

CEO Robert Cook says three examination teams may be consolidated.


Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting It'll help us continue to serve you.

Yes, show me how to whitelist

Ad blocker detected. Please whitelist us or give premium a try.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print