The public will get even more access to broker disciplinary information now that the SEC has approved amendments to FINRA’s Rule 8312. In a recent decision, the SEC gave FINRA more leeway to publish appeals, pending or withdrawn complaints, and other disciplinary information in its monthly notice. What’s more, the SEC allowed FINRA to store more comprehensive data on appeals or withdrawn complaints, something not currently available on the BrokerCheck database.
Although designed to help consumers with their due diligence, the decision significantly raises the reputation stakes for brokers with unhappy clients who file complaints that may be unwarranted. As always, the National Ethics Association urges advisors with securities licenses to do their best to remain in compliance. Following are some major items to consider.
- Consider client’s interests before recommending purchase of securities.
- Always be properly licensed and registered before selling securities.
- Never engage in fraudulent activities or client misrepresentation.
- Only offer products that are on your broker-dealer’s approved list. If not on list, secure approval first.
- Make sure all securities orders are in line with client investment objectives and risk profile.
- Always deliver a current prospectus to clients prior to purchase and never highlight areas for them to read.
- Do not accept client payments for securities purchases in cash or ask that checks be made out to you.
- Always use stationery and marketing materials that have been approved by your broker-dealer.
- Never use “For Broker/Dealer Use Only” or “For Internal Use Only” materials with clients.
- Immediately notify your broker-dealer of any client complaints, personal bankruptcy or arrests.
Finally, keep in mind that the above is just a starter list. Always rely on your compliance department for guidance on the latest regulations and enforcement priorities. Remember, in today’s Internet era, even relatively minor mistakes can have a major (and lasting) impact on your reputation. As FINRA’s BrokerCheck provides ever more transparency, the best strategy will always be prevention.