NOW THAT FINRA HAS TAKEN the wraps off a new and improved version of its BrokerCheck database, it is time for the regulator to get serious about making sure that investors are aware of this valuable resource
and that the information found in the database is accurate and up-to-date.
The Financial Industry Regulatory Authority Inc. created BrokerCheck to allow investors to look quickly into the background of brokers and their firms.
In response to prodding by the Securities and Exchange Commission, Finra recently expanded BrokerCheck's capabilities.
Specifically, it unified the information found on BrokerCheck and the Investment Adviser Public Disclosure system. Investors now have centralized access to licensing and registration information on 1.4 million former and current brokers and 17,400 Finra-registered firms.
The upgrade also gives users the ability to perform ZIP code searches to find brokers in their area.
But all the added bells and whistles will be for naught if investors are unaware of BrokerCheck's existence or if the information found in the database is unreliable.
Therefore, it is incumbent upon Finra to make sure that it has policies and procedures in place to make it easier for investment advisers to challenge information on their BrokerCheck report that they regard as inaccurate, unbalanced or outdated.
Currently, the only way for a broker to dispute information found on a BrokerCheck report is to challenge the firm or regulator responsible for the error. Consequently, the process of expunging information from a report often involves arbitration, which is a lengthy, not to mention costly, process.
Therefore, Finra should consider ways to expedite the process of arbitrating cases involving allegations of defamation as a result of inaccurate or misleading form filings.
Putting disputes involving information found on BrokerCheck reports on a fast track would help assure the accuracy of the information found on the database.
Finra recently said it wants to raise investor awareness about BrokerCheck. Right now, only about 10% of investors use it to make decisions about investment professionals. That is far too low.
One way to increase awareness is to promote the site in the media and through ad campaigns. Another is to require brokers and member firms to display links to BrokerCheck prominently on all electronic media used to communicate with customers, including e-mails and company websites.
Investors have a right to information about their brokers' work history, licensing credentials and disciplinary records. BrokerCheck provides them that access.
Now they just need to know that it is out there.
