More On Legal & Compliancefrom The Advisor's Professional Library
- The Few and the Proud: Chief Compliance Officers CCOs make significant contributions to success of an RIA, designing and implementing compliance programs that prevent, detect and correct securities law violations. When major compliance problems occur at firms, CCOs will likely receive regulatory consequences.
- Updating Form ADV and Form U4 When it comes to disclosure on Form ADV, RIAs should assume information would be material to investors. When in doubt, RIAs should disclose information rather than arguing later with securities regulators that it was not material.
Starting in August, the Financial Industry Regulatory Authority (FINRA) will begin to implement changes to its free, online BrokerCheck service that will significantly expand the amount of publicly available information about current and former securities brokers. The changes were recently approved by the Securities and Exchange Commission (SEC), FINRA said in a statement issued Tuesday, July 13.
According to the statement, the changes will increase the number of customer complaints reported publicly, extend the public disclosure period for the full record of a broker who leaves the industry from two years to 10 years and make certain information about former brokers available permanently-including criminal convictions and certain civil injunctive actions and arbitration awards against the broker.
The changes will also formalize a dispute process for current or former brokers to dispute the accuracy of, or update, factual information disclosed through BrokerCheck, FINRA said.
Beginning in late August, BrokerCheck will disclose all "historic" complaints against a broker dating back to 1999, when electronic filing of broker information began. Historic complaints are customer complaints, arbitrations or litigations more than two years old that have not been adjudicated or have been settled for an amount less than the reporting requirement (currently $15,000).
At present, these are reported on BrokerCheck when the broker has three or more currently disclosable regulatory actions, customer complaints, arbitrations, litigations or historic complaints. The expanded BrokerCheck will disclose all historic complaints dating back to 1999 for individual brokers who are currently registered or whose registrations were terminated within the preceding 10 years.
By year-end, BrokerCheck will implement three other changes:
? Expand the disclosure period for former brokers. At present, a broker's record is publicly available for two years after he or she leaves the securities industry. That two-year period coincides with the period in which an individual remains subject to FINRA's jurisdiction and within which an individual can return to the industry without having to take re-qualifying exams. The expanded BrokerCheck will make a former broker's record public for 10 years, allowing investors to access information about individuals who may work in other sectors of the financial services industry or who have attained other positions of trust.
? Further expand the amount of information that is permanently available on former brokers. In 2009, BrokerCheck started making information about final regulatory actions (such as bars and suspensions) against former brokers permanently available to the public. The expanded BrokerCheck will make additional information that has been reported to FINRA since 1999 permanently available; this will include reportable criminal convictions or pleas of guilty or nolo contendere; civil injunctions or findings of involvement in a violation of any investment-related statute or regulation; and arbitration awards or civil judgments based on the individual's involvement in alleged sales practice violations.
? Formalize the process for current and former brokers to dispute the accuracy of factual information disclosed through BrokerCheck. Brokers will be able to submit a written notice of the dispute to FINRA (the organization will post the appropriate form on its Web site) with all available supporting documentation. If FINRA determines that the dispute is eligible for investigation, it will add a general notation to the broker's BrokerCheck report, stating that the broker disputes certain information in the report, and that notation will be removed only when FINRA has resolved the dispute. If its investigation shows the information is in fact inaccurate, FINRA will update, modify or remove that information as appropriate.
FINRA said full details on BrokerCheck's expansion will be available in a FINRA Regulatory Notice to be published in the near future.
Read a story about FINRA's rules regarding social media from the archives of InvestmentAdvisor.com.
Michael S. Fischer (firstname.lastname@example.org) is a New York-based financial writer and editor and a frequent contributor to WealthManagerWeb.com.