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A Better Partnership


Mar 2012
March 06, 2012

FINRA Proposes Expansion of BrokerCheck

In the internet era, consumers have unprecedented access to information at the click of a button.  That has certainly been the case for investors who want to research their current or prospective financial advisor.  BrokerCheck is reportedly the most clicked-upon link on FINRA’s website.  In an era where many consumers would not even purchase a toaster before exhaustively researching its reviews on multiple on-line resources, you can bet investors are conducting their internet due diligence before choosing a professional to help handle their investable assets.

Few would disagree it is good to provide investors accurate, relevant information they can use to help them select an investment professional.  But FINRA has proposed changes to BrokerCheck that would significantly expand the scope of publically reported information, and some of those changes may do more harm than good.  Specifically, as part of FINRA’s proposal, the investing public would be provided access to information that investors may have difficultly properly understanding and putting into context.  For example, until now, the specific reasons for a broker’s separation from a previous employer have not been included on BrokerCheck, but that would change under the new proposal.  Brokers always have been largely at the mercy of their former employer when it comes to the description of the reason for their separation listed on the Form U5.  That risk is heightened if that information can be seen by investors who may be deciding whether to follow their broker to a new firm.

FINRA’s new proposal also would make public the scores achieved by registered individuals on their licensure exams. There is substantial risk that investors may not be able to properly understand and make judgments based on this sort of information, but rather could conclude one broker is “better” or “smarter” than another simply because he or she notched a slightly higher score on the Series 7 exam!

FINRA is accepting comments on this proposal through April 6, and plans to have the new rule implemented by July of this year.  Investment professionals should think carefully about how the new proposed rules may affect them, and speak up while they still have the chance.

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