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FSI gives revised Finra BrokerCheck link rule the thumbs down

Jun 12, 2014 @ 1:30 pm

By Mark Schoeff Jr.

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An interest group representing independent broker-dealers continues to object to a proposal by Finra — despite the regulator's modifications to the measure — that would require links to a broker database on firms' websites and online communications.

Under the Financial Industry Regulatory Authority Inc.'s revised proposal, a brokerage firm must include a prominent reference and link to BrokerCheck, an online repository of broker background information, on their websites available to retail investors. A firm also must include a BrokerCheck link in online profiles of their registered representatives.

The revised proposal, designed to increase investor use of BrokerCheck, eased requirements put forth in the original January 2013 proposal that related to social media and third-party websites. It also removed a requirement that the links go directly to a broker's summary page on BrokerCheck.

The changes were not enough to win over FSI, which wants Finra to entirely eliminate the requirement that a BrokerCheck link be included on third-party websites and social media, the group said in a June 12 comment letter.

“Firms will incur significant costs and operational burdens to implement the requirements and monitor for compliance,” wrote David Bellaire, FSI executive vice president and general counsel. “While Finra's goals with the requirements related to third-party websites are laudable, many aspects of these requirements may not be feasible, and it is unclear whether they will actually increase traffic and awareness of BrokerCheck.”

The deadline for comment letters is June 16.

Firms would have to create new written materials and policies for the BrokerCheck link rule and would have to ensure that their financial advisers are properly adding links to their websites and social media, Mr. Bellaire said in describing additional regulatory costs. In addition, there's no automated way to add a BrokerCheck link to each of their advisers' social media accounts.

Although the revised proposal doesn't require a BrokerCheck link on individual messages on social media platforms, it does say that a link should be posted in the “about” sections of profile pages on Twitter, Facebook, YouTube and Pinterest and in the “background summary” section of LinkedIn.

The FSI said that suggestion is unworkable because social media platforms will continually evolve.

“While Finra has provided helpful guidance with respect to the locations on existing social media sites where the BrokerCheck link can be placed, future social media platforms utilized by the public and advisers may not have room for the BrokerCheck link or may require additional guidance from Finra,” Mr. Bellaire wrote. “In addition, existing social media platforms may change the fields and locations where Finra has suggested the required link to BrokerCheck appear.”

Finra wants to elevate the profile of BrokerCheck, which contains professional and disciplinary information about brokers. But FSI suggested it evaluate whether the link proposal is the best way to do it.

“FSI believes Finra should conduct a cost-benefit analysis to determine whether adding the proposed link to BrokerCheck in the designated locations will in fact increase traffic to the site,” Mr. Bellaire wrote.

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