The Financial Industry Regulatory Authority (FINRA) is proposing a major expansion of its BrokerCheck service which would make records of final regulatory actions against brokers permanently available to the public, regardless of whether they continue to be employed in the securities industry. Under current rules, a broker’s record generally becomes unavailable to the public two years after he or she leaves the securities industry and is therefore no longer under FINRA’s jurisdiction. BrokerCheck is a free online service through which investors can instantly see the employment, qualifications, and disciplinary history of more than 650,000 brokers under FINRA’s jurisdiction. FINRA estimates there are more than 15,000 individuals who have left the securities industry after being the subject of a final regulatory action and whose disciplinary history is not currently available on BrokerCheck. FINRA filed its rule proposal to expand BrokerCheck with the SEC in mid April. The SEC will publish the proposal in the Federal Register and solicit public comment in the near future. In 2008, FINRA says individuals used BrokerCheck to conduct 11.6 million reviews of broker or firm records. Investors can access BrokerCheck at www.finra.org/brokercheck or by calling (800) 289-9999.
The Securities and Exchange Commission on May 5 filed fraud charges against several entities and individuals who operate the Reserve Primary Fund for failing to provide key material facts to investors and trustees about the fund’s vulnerability as Lehman Brothers Holdings sought bankruptcy protection. In bringing the enforcement action, the SEC said that it also seeks to expedite the distribution of the fund’s remaining assets to investors. In a complaint filed in U.S. District Court for the Southern District of New York, the SEC is asking for an order compelling a pro rata distribution of remaining fund assets, which would release a significant amount of money that is currently being withheld from investors pending the outcome of numerous lawsuits against the fund, the trustees and other officers and directors of the Reserve entities.