Fire heats up under Finra's Brokercheck link proposal

Industry heavyweights including Schwab, Wells Fargo and SIFMA bemoan new version, saying it's still too costly and vague

Jun 18, 2014 @ 2:08 pm

By Mason Braswell

finra, brokercheck, regulation
+ Zoom

Major brokerage firms and industry trade groups have reiterated their objections to a controversial Finra proposal that would require links to a public database of brokers' records in the firms' online marketing materials.

At the close of a public comment period on Monday, such firms as Wells Fargo Advisors and Charles Schwab & Co. Inc., and trade groups such as the Securities Industry and Financial Markets Association all filed comment letters adding fresh critiques to the controversial proposal.

The proposal would require brokers to place a link on social media and other public sites to Finra's BrokerCheck database of advisers' disciplinary records and employment history.

“Wells Fargo Advisors applauds Finra for seeking to enhance investor protection, but urges Finra to balance the potential benefits derived from making BrokerCheck more accessible to investors with the burdens imposed on member firms to comply,” wrote Robert McCarthy, director of Regulatory Policy for Wells Fargo Advisors.

It's the second time that Finra has floated the proposal, which seeks to raise investors' awareness of the database. The latest proposal was modified to exclude objectionable requirements, including one that would have required firms to post “deep links” that would refer directly to the broker's individual BrokerCheck record.

Under the modified proposal, the links instead could go to the BrokerCheck home page.

While many firms expressed appreciation for the modifications, the proposal on the table is still too strict, they said.

Most of the criticism revolved around the specifics such as space constraints on certain websites, costs of compliance and questions about which communications could be affected.

“Although many of the primary operational considerations have been addressed, concerns remain on the hyperlinking for sites not controlled by firms as linking protocols on sites vary widely, are not subject to broker-dealer control and may change with little or no notice to the broker-dealer,” wrote Melissa Callison, vice president of communications compliance at Schwab.

SIFMA echoed the concerns about the broad applicability of the proposal.

“The proposal should therefore be modified to eliminate the prescriptive 'must'…and replace that language with more flexible language such as 'should, to the extent reasonable,'” wrote Melissa MacGregor, associate general counsel at SIFMA.

The current proposal would not apply to emails, individual tweets, and certain directories or listings of brokers, but Mr. McCarthy of Wells Fargo said that it would still be costly to review and approve all marketing materials for compliance with the rule, which could apply retrospectively, he said.

“Firms could be required to review tens of thousands of prior online retail communications to determine if they are subject to the rule, employing substantial resources and taking years to complete,” Mr. McCarthy said.

Earlier this month, another industry group representing independent broker-dealers, the Financial Services Institute, said that the proposal was unworkable because of the frequent changes in social media sites and emergence of new sites. < http://www.investmentnews.com/article/20140612/FREE/140619967>

On the other side, the Public Investors Arbitration Bar Association, a group of plaintiffs' attorneys representing investors, said that the plan doesn't go far enough. Email signatures should also have to include a BrokerCheck link, the group said.

PIABA also disagreed with the decision to not require a direct “deep” link to the individual BrokerCheck page.

Finra's Board of Directors would still have to approve a version of the rule before it would go before the SEC.

Finra spokeswoman Nancy Condon said Finra would respond to the comments when the rule was filed with the SEC, as is customary.

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