FINRA BrokerCheck Plan Gets More Flak

FSI wants clarity for indie reps; NASAA wants rule to include email signatures

While the Financial Industry Regulatory Authority’s revamped plan to require firms to provide a hyperlink to BrokerCheck on their websites is less burdensome than the original 2013 version, industry groups complain the new version still needs work.

FINRA filed its revamped proposal to amend FINRA Rule 2210 (Communications with the Public) with the Securities and Exchange Commission on June 29. The SEC took comments on the plan until Monday.

The proposed rule change would require each of a member’s websites to include a “readily apparent reference and hyperlink” to BrokerCheck on the initial Web page that the member intends to be viewed by retail investors, as well as any other Web page that includes a professional profile of one or more registered persons who conduct business with retail investors.

The Financial Services Institute, which primarily represents independent broker-dealers and their affiliated advisors, told the SEC in its Monday comment letter that while it appreciates that the latest version of the rule wouldn't require BrokerCheck links on social media sites and directories, FSI wants further clarity on how the rule applies to advisors who are independent contractors.

FSI notes that while its broker-dealer members don’t anticipate “significant issues in implementing the ‘readily apparent reference’ for their own websites, “it is unclear from this language whether the client-facing website of a financial advisor engaged in an independent contractor relationship with their broker-dealer would be considered a ‘member website’ or a third-party website” under FINRA’s plan.

“Specific guidance” is also needed that “retains the rule’s exclusion of social media and other third-party websites and clarifies the status of websites operated by independent contractor financial advisors,” FSI said.

Further, FSI said that it wants clarity on how the rule applies to third-party websites that contain the professional profiles of financial advisors that engage in a networking relationship with these third parties, such as websites owned and operated by credit unions and other non-FINRA members.

But the North American Securities Administrators Association told the SEC in its comment letter that FINRA’s new plan omits one of the “most effective” parts of the original plan: "deep links" to individual broker records.

A deep link is a BrokerCheck link that sends the user directly to the BrokerCheck summary reports specific to a firm or broker, and includes a firm’s or individual’s CRD number.

“Including direct hyperlinks and, specifically, individualized deep links would have virtually automatically and effortlessly connected investors with the specific BrokerCheck information relevant to that investor,” NASAA said.

Further, NASAA said that FINRA’s revamped plan continues to wrongly exclude email. “Continuing this [email] exclusion weakens the effectiveness of the rule,” NASAA stated. FINRA should reinstate “the deep link component” and extend the proposed rule to email as both “would strengthen the proposal,” NASAA argued.

A NASAA spokesperson explained to ThinkAdvisor on Tuesday that the idea of including email "would be to have the BrokerCheck link in the signature block of the email. It could be as simple as a link to BrokerCheck, or as involved as a deep link for the rep."

These two components — email and deep links — NASAA continued in its comment letter, “would be significantly more effective than ‘readily apparent references and hyperlinks’ to the BrokerCheck system in increasing investors’ real-time, day-to-day exposure to financial advisor information, especially considering electronic mail is a widely used tool to conduct business.”

FINRA’s plan also needs to be expanded beyond broker-dealer websites geared toward retail investors and online communications to require a BD to include a link to BrokerCheck “from a third-party website over which the broker-dealer or its employee has control, such as a proprietary social media site,” NASAA said, as investors are increasingly communicating with advisors via social media and as such sites as LinkedIn “are being used as communication platforms.”

NASAA said it urges FINRA to “maximize BrokerCheck’s visibility in additional areas where the firm or its financial advisors have an expanding presence and do exert control over either the site or the content of the site.”

The SEC staff typically requests that FINRA respond to the comments received. FINRA may decide to amend the rule proposal as a result of the comments.

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