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October 21, 2016 at 06:11 AM
The Financial Industry Regulatory Authority has failed to fix serious flaws in brokers’ background information provided on BrokerCheck, and Congress should step in if changes aren’t implemented soon, the Public Investors Arbitration Bar Association charges in a new report.
PIABA, a group of lawyers who represent investors in cases against securities firms, maintains that FINRA has not addressed the flaws cited by a March 2014 PIABA report, and that FINRA “made things worse by spending millions in advertising to get unwary investors to rely on the flawed” BrokerCheck system.
Information that is still not included in BrokerCheck reports, but available from many state securities agencies, include: the circumstances of a broker’s termination of employment (especially when the broker quits during the course of his firm’s investigation of his conduct), bankruptcy filings, tax liens and test scores, PIABA says.
(Related: FINRA’s Top 5 Fine Categories in Potentially Record-Setting Year)
FINRA advertises the BrokerCheck reports as being “complete,” PIABA says, “and helpful to investors wanting to learn more about specific brokerage firms and financial advisors.”
The 2014 report “discussed the fact that, in reality, BrokerCheck reports often omit information about brokers that is highly relevant and necessary for investors to make informed decisions about who they may want to hire.”
PIABA President Hugh Berkson, who co-authored the just-released report, said that “Before FINRA spent millions of dollars advertising BrokerCheck, it should have fixed its broken disclosure system. The current incomplete BrokerCheck reports are of limited value.”
