finra

FINRA

For Release:
Contacts:

March 6, 2014
Nancy Condon (202) 728-8379
Michelle Ong (202) 728-8464
George Smaragdis (202) 728-8988

 

 

FINRA’s Expanded Statement on PIABA’s Public Disclosure Study

As part of its ongoing mission to protect investors, FINRA created BrokerCheck, the only online, free database providing relevant information for investors 24 hours a day, seven days a week. While BrokerCheck is not perfect, FINRA remains committed to improving the system to help investors obtain free, unbiased information about investment professionals and firms. FINRA has committed considerable resources and made significant enhancements to BrokerCheck, particularly over the last five years, to create a more user-friendly interface that allows investors to quickly access and intuitively understand the professional background of investment professionals.

 

BrokerCheck is a widely recognized valuable tool, so much so, that more than 75% of state securities regulators link to BrokerCheck from their websites.  The PIABA study argues that FINRA should make all information in CRD available on BrokerCheck, without regard for the materiality of the information to investors. By this same logic, PIABA members would presumably have no objection to providing bar exam scores to anyone requesting the information.  It is important to note that we do have to make determinations on what information about registered representatives is appropriate to release, while at the same time balancing fairness rather than ignoring it.

 

The authors of PIABA’s study begin by noting, incorrectly, that FINRA makes “only a small portion” of the information contained in CRD available through BrokerCheck.  In support of this flawed premise, they then cite four categories of information included in a CRD snapshot that are allegedly not provided on BrokerCheck:

 

  1. Reasons for termination.  When a broker resigns, or is fired or permitted to resign, after allegations of violation of investment-related laws or rules, fraud or wrongful taking of property, or failure to supervise, both the termination of employment and the allegations of misconduct are reported on BrokerCheck.  Other reasons for termination, which do not implicate investor protection issues, are not reported.  Nonetheless, PIABA mistakenly contends that BrokerCheck always excludes reasons for termination.
  2. Formerly reportable information.  BrokerCheck currently excludes bankruptcies more than ten years old, consistent with the SEC and state approved uniform registration forms and the federal Fair Credit Reporting Act (FCRA). BrokerCheck also excludes judgments or liens that have been satisfied, which are reportable for seven years under FCRA. PIABA nonetheless argues for perpetual disclosure of bankruptcies and satisfied liens and judgments.
  3. Examination scores.  BrokerCheck provides information regarding the name and date of all qualifying examinations that the broker has passed.  BrokerCheck does not provide test scores or information regarding failed exams.  Though PIABA offers no evidence to support a correlation between test scores and broker competence, the authors argue that if an investor decides the information is important, they should be permitted to see it.
  4. Internal review disclosure.  When a broker is the subject of an internal review by a former employer, disclosure information regarding that matter is not provided on BrokerCheck.  Nonetheless, the events related to the internal investigation may be reported under sections of the uniform registration forms for disclosure of employment termination, regulatory action, customer complaints, arbitration or civil litigation.

 

FINRA works closely with our partners in the states on our joint core mission of protecting American investors. FINRA has consistently, and for many years, encouraged investors to both use BrokerCheck and consult their state securities regulator before doing business with an investment professional. To that end, users of BrokerCheck are repeatedly encouraged to check with state securities regulators and provided links to the websites of state securities regulators.


As part of its ongoing mission to protect investors, FINRA remains committed to continually improving the system BrokerCheck as a best-in-class tool.