More On Legal & Compliancefrom The Advisor's Professional Library
- Client Communication and Miscommunication RIA policies and procedures must specify what type of communications should be retained. The safest course of action is for RIAs to retain all communicationsto clients, from clients, and about client accounts. To comply with fiduciary obligations, communications must be thorough and not mislead.
- Agency and Principal Transactions In passing Section 206(3) of the Investment Advisers Act, Congress recognized that principal and agency transactions can be harmful to clients. Such transactions create the opportunity for RIAs to engage in self-dealing.
The Financial Industry Regulatory Authority plans to expand its High Risk Broker initiative next year, which has so far barred 16 brokers in 2013, and is planning further enhancements to BrokerCheck, FINRA CEO Richard Ketchum told Sen. Edward Markey, D-Mass., in a recent letter.
Under its High Risk Broker initiative, launched in February, Ketchum told Markey that 42 brokers have been designated as high risk by FINRA’s Office of Fraud Detection and Market Intelligence, “resulting in fast-tracked regulatory actions.” Ketchum told Markey in a Nov. 13 letter that FINRA plans to “create a dedicated enforcement team” in 2014 to go after high-risk brokers.
Markey posted Ketchum’s letter on his web site Friday.
Ketchum was responding to concerns raised by Markey in a letter, which stated that “the fact that dozens of brokers have been designated high risk and 16 brokers have been barred from the securities industry in mere months underscores the urgent need for FINRA and the SEC to engage in much more vigorous enforcement of rogue brokers.”
Said Markey: “FINRA’s commitment to expand the High Risk Broker initiative and establish a dedicated enforcement team are important initial steps.”
From January 2011 through Sept. 30, 2013, FINRA has barred 1,342 individual brokers for a variety of violations of the federal securities laws or FINRA rules, Ketchum told Markey.
As to further enhancements to BrokerCheck, Markey told Ketchum that while he “commends” FINRA for making BrokerCheck more user-friendly, he remains “concerned that the information BrokerCheck provides to investors is incomplete.”
Ketchum noted the most recent change to BrokerCheck on Oct. 26, which presents search results in a graphical timeline, illustrating a more user-friendly view of an industry professional’s employment status and history, industry registrations, and any reportable events such as customer disputes or disciplinary actions that may have occurred during his or her career.
FINRA also recently enhanced BrokerCheck’s Internet presence to allow investors to search investment professionals and investment firms through Google and Bing to obtain results with direct links to records in BrokerCheck.
“This week,” Ketchum continued, FINRA is deploying “a stand-alone and more visible BrokerCheck search box, first on the FINRA home page and then on other investor-related web sites, that will enable investors to enter a broker or firm name and go directly to the search results page in BrokerCheck.”
Ketchum also told Markey that FINRA is reviewing “existing information about expungement” on BrokerCheck, “as well as the placement of that information, to better inform investors and others of the possibility that matters have been expunged from a BrokerCheck record.”