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Regulation and Compliance > Federal Regulation > FINRA

FINRA pushing for greater broker transparency

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The Financial Industry Regulatory Authority is about to give advisors even greater incentive to keep their records free of black marks. That’s because FINRA is moving to expand the amount of information publicly available on its BrokerCheck service. Once the SEC approves, the expanded BrokerCheck will:

Disclose all “historic” complaints against a broker dating back to 1999, when electronic filing of broker information began. Generally, 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). The new proposal would disclose all historic complaints dating back to 1999 for individual brokers who are currently registered or whose registrations were terminated within the preceding two years. If the SEC approves all of BrokerCheck expansion proposals, the reporting of historic complaints would apply to brokers whose registrations were terminated within the preceding 10 years.

Expand the disclosure period for former brokers. Currently, 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 requalifying exams. The new proposal calls for making a former broker’s record public for 10 years, so investors can 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. Last year, BrokerCheck started making information about final regulatory actions against former brokers permanently available to the public. The new proposal would make additional information permanently available, including 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 an alleged sales practice violation.

Given this development, the National Ethics Bureau suggests all FINRA-licensed advisors redouble their efforts to prevent compliance infractions. That means tightening up all business practices relating to solicitation, suitability, recordkeeping, client communications and privacy, among others. Bottom line: If advisors have nothing to hide, they have nothing to fear from enhanced disclosure requirements.


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