Investors would be able to access information about a financial adviser’s business and disciplinary history directly from the firm’s web page under a new rule proposed by the
Financial Industry Regulatory Authority Inc.
In a
regulatory notice filed in the Jan. 25 edition of the Federal Register, Finra said the rule would require its broker-dealer members to include “a prominent description of and link to BrokerCheck … on their websites, social-media pages and any comparable Internet presence.”
Every year, brokers have to provide the BrokerCheck hotline number and Finra website address to their clients in writing. BrokerCheck contains information on brokers, including their professional background, the type of practice they run and whether they have been disciplined by Finra or other regulators.
Under the new proposal, a broker or firm’s website would have a direct link to the broker’s or firm’s specific BrokerCheck page. Investors would be able to click and go right to those pages rather than the home page for the BrokerCheck site.
“Finra believes that the proposed rule change would increase investor awareness and use of BrokerCheck, thereby helping investors make informed choices about the individuals and firms with which they conduct business,” the Federal Register notice stated.
The proposal responds to a January 2011 study by the Securities and Exchange Commission, mandated by the Dodd-Frank financial reform law, that examined ways to increase investor access to BrokerCheck.
“The Finra proposal is pretty narrow,” said Laura Anne Corsell, a partner at Montgomery McCracken Walker & Rhoads LLP and chairwoman of the firm’s investment management practice. “It would make it easier for investors to obtain information that the regulators already maintain. It’s hard to take issue with that.”
The BrokerCheck proposal follows a recent Finra proposal to make brokers
disclose their compensation incentives when they move from one firm to another.
“It’s a trend to delve more and more into the broker-client relationship,” said Peter Chepucavage, general counsel at Plexus Consulting Group LLC. “How many of these things are you going to mandate?”
Some of the language in the BrokerCheck system provides vague descriptions of violations that can make them sound worse than they are, according to Mr. Chepucavage.
“I’ve had a number of clients where I felt it was unfair to them,” he said.
He said he doesn’t disagree with the Dodd-Frank goal of increasing investors’ ability to learn more about their brokers. But he said regulators should encourage them to ask a broad range of questions rather than promulgate piecemeal rules to increase transparency.
“It’s an attempt to make things too specific, when a general notice would be better,” Mr. Chepucavage said.
The Finra proposal comes when there is much confusion about how investment advisers and brokers can use websites, blogs and social media. Ms. Corsell said that the rule should catalyze efforts to clarify policy toward online communication surrounding investment advice.
“Isn’t this an indication that a broader discussion of social media is in order?” Ms. Corsell said.
The Finra proposal on providing links to BrokerCheck from financial advisers’ websites will be open for public comment for 45 days from its Jan. 25 publication in the Federal Register.
