In the post-Bernard Madoff environment, it is hoped that investors are more aware of the wisdom of checking up on anyone in the financial services industry with whom they are thinking of doing business, or hiring to handle their financial affairs.
If nothing else, investors have the right to accurate information about a financial professional's work history, licensing credentials and disciplinary records.
It is for this reason that the
Financial Industry Regulatory Authority Inc. is to be applauded for its efforts to improve the BrokerCheck database and to make it more relevant to investors.
Any initiative that reduces investors' vulnerability to fraud, and thereby strengthens their confidence in the markets, is a step in the right direction.
RELEVANT AND VALUABLE
The key, of course, is for Finra to ensure that the information disclosed in the database is relevant and valuable to clients who are evaluating a firm, broker or adviser.
Last month, Finra submitted to the Securities and Exchange Commission proposed amendments that would put some new requirements on broker-dealers to connect consumers with BrokerCheck.
The proposed amendments would require member firms to include a reference and a link to BrokerCheck on their own company home pages and related websites for Finra-registered brokers. Finra also has proposed an amendment to disclose any investment-related civil actions that have been dismissed as a result of a settlement agreement on BrokerCheck.
This comes on the heels of changes that Finra made in May to BrokerCheck, which included making it easier for investors to check licensing and registration information for current and former brokers and brokerage firms, investment adviser representatives and investment advisory firms.
Finra also added the ability to search for and locate a financial services professional based on main office and branch locations, and the ability to conduct ZIP code radius searches in increments of 5, 15 or 25 miles.
What's more, it gave investors access to expanded educational content, including new help icons that link to explanations of terms commonly used throughout the system and within BrokerCheck reports.
CHANGES RAISE CONCERNS
There have been some concerns from industry observers in regard to BrokerCheck.
Some have questioned whether brokers will be allowed to correct inaccurate information in the database, while others have voiced concerns that it isn't complete. The ability to provide explanatory text in disclosure-reporting pages also was suggested.
Finra officials said they have a process in place to correct factual inaccuracies in the Central Registration Depository.
Finra urges financial professionals to speak to their firm to see if the inaccuracy can be fixed with a regular filing. If that doesn't work, or individuals don't find satisfaction with that process, they should contact Finra directly to remedy the issue.
In addition, individuals have the ability to provide explanatory text for a disclosable event in the U4 Disclosure Reporting Pages. This unaltered language is part of the rep's BrokerCheck report and serves to provide the client with the individual's perspective of the event.
Although even the most reputable sources have their flaws, it is critical that Finra continue its efforts to resolve any inaccuracies to make sure that the information found in this valuable database is relevant and up-to-date.
Financial services firms and individual financial professionals should embrace any increased transparency for investors. Most agree that it is important for clients to know the background of the people who control their finances.
The bottom line: If it's good for investors, it's good for the industry.
