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April 16, 2014 at 08:57 AM
After recent reports claimed that the Financial Industry Regulatory Authority’s BrokerCheck is full of holes and deletes crucial information about brokers’ backgrounds, FINRA’s board plans to consider on April 24 an amendment to its supervision rule, including background investigations of new brokers as well as requiring firms to beef up their verification of reps’ U4s.
FINRA announced Wednesday its rulemaking items for discussion at the April 24 board meeting, which includes a proposed amendment to FINRA Rule 3110, the supervision rule, regarding background investigations of applicants for registration, including requiring firms to adopt written procedures to verify Form U4.
Brokers use Form U4 to begin and end their registered relationship with FINRA; it asks questions about employment and criminal history. The self-regulator says that the forms are essential to its ability to perform its regulatory oversight responsibilities.
In March, The Wall Street Journal wrote that its own survey had revealed that more than 1,600 brokers had bankruptcy filings or criminal charges that weren’t publicly reported, which violated FINRA regulations.
The Journal says that it uncovered the reporting failures by comparing the records of more than 500,000 stockbrokers, obtained from states, with criminal and bankruptcy-court filings.
The Journal reported Tuesday that FINRA also intends “to vet the information publicly reported for each of the approximately 630,000 stockbrokers it oversees against public court records.”
