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Brokers unable to escape their past

As Finra looks to make BrokerCheck more visible, youthful indiscretions come back to haunt some advisers

Jun 27, 2014 @ 3:34 pm

By Mason Braswell

As Finra looks to boost awareness of its database of brokers' records, more advisers may find themselves revisiting some of their lives' more dubious moments.

In addition to a broker's employment history and any customer complaints, the Financial Industry Regulatory Authority Inc.'s database is full of youthful indiscretions from the classic fraternity prank gone awry to shoplifting and drag racing. Even though they may not be investment-related, they must still be disclosed.

While those indiscretions may go under the radar now, several Finra efforts, including a proposal to require brokers to include a link to the database on all online marketing materials and social media, may bring some skeletons out of the closet.

There's the case of the broker who stole a cheeseburger to get into his fraternity, another who got on a train without paying and several who wound up in handcuffs trying to impress their girlfriends.

(Here are 12 disclosures you have to see to believe.)

They show up as a red dot labeled “criminal” on the brokers' timeline, often many years before they were ever registered with a securities firm. The broker's explanation of the charges is included in a detailed report.

In some cases, the explanation can be more amusing than the crime, as in the case of one broker who attributed a charge of promoting prostitution to an “overzealous undercover officer.”

Unlike customer complaints, however, criminal charges cannot be expunged from the database. By Finra rules, advisers must report even mundane events with the same seriousness of a violent crime. Those records remain publicly available even after brokers have left the industry and are no longer registered with Finra.

At the same time, several attorneys who represent investors have been saying Finra's database does not go far enough in disclosing potentially relevant events in brokers' lives. The Public Investors Arbitration Bar Association said that items such as brokers' performance on tests and bankruptcies older than 10 years should be included.

Some in the industry have made the point that they already have to disclose more than other professions, such as lawyers and doctors.

Those events can still be a thorn in the side of brokers making moves or speaking with prospective clients, said Danny Sarch, a career consultant and president of Leitner Sarch Consultants.

“In the recruiting process, it's seen for what it is,” Mr. Sarch said. “But the firm has to ask for an explanation because when somebody moves, the license is rechecked by every state.”

Mr. Sarch said that it's more harmful that those offenses are still marked as “criminal” on the BrokerCheck page because investors don't know the full details of the case unless they click through to the broker's full report.


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