The Securities and Exchange Commission has approved a Finra rule that would require brokerage firms to include a link to a public database containing background information about their brokers on their websites.
Under the rule, a brokerage will have to include a “readily apparent reference and hyperlink” to BrokerCheck on a home page that is initially viewed by retail investors. It also would have to include links to the database on profile pages of individual brokers.
The rule will go into effect no later than 180 days after Finra publishes a regulatory notice in the Federal Register. The notice must be published by Dec. 7.
The rule is part of an effort by the
Financial Industry Regulatory Authority Inc. to raise awareness of BrokerCheck among investors. The database contains a broker's work history, registrations, disciplinary record and other information.
“BrokerCheck is an important tool for investors to use to help them make informed choices about the individuals and firms with which they conduct business,” the
SEC states in its Oct. 8 order approving the rule. “The Commission believes that the requirement for the hyperlink to BrokerCheck to be readily apparent should make it easy for investors to find and use BrokerCheck.”
Originally proposed in January 2013, the rule
was withdrawn and then twice modified before it was finalized.
Previous versions mandated that links also be included on social media pages, such as Twitter and LinkedIn, and that they go straight to a broker's BrokerCheck profile rather than the
BrokerCheck homepage.
Those requirements drew
strong opposition from the industry, which argued that they would be too costly and technologically unwieldly to meet.
The final version of the rule satisfied one of the strongest critics of the initial proposal, the Financial Services Institute, which represents independent broker-dealers and financial advisers.
“The rule is an example of regulators and the industry constructively working together to achieve the shared objective of enhanced transparency and investor access to information,” David Bellaire, FSI executive vice president and general counsel, said in a statement.
The rule's approval doesn't mark the end of Finra's efforts to promote its broker database.
“Finra notes that it will continue to monitor investors' awareness and use of BrokerCheck and consider whether to pursue further rulemaking,” the SEC order states.
