Finra Board Approves Expanding Data Public Sees on Brokers
The Financial Industry Regulatory Authority is moving ahead with plans to expand the information about brokers and firms’ records that the public can review in its BrokerCheck database.
Finra’s board on Friday authorized a regulatory notice soliciting comments on a proposed amendment to provide additional information about individuals and firms that are dually registered as brokers and investment advisers, with investment advisory data similar to what the Securities and Exchange Commission discloses through its Investment Adviser Public Disclosure” site, according to a summary.
In another move that could allay concerns from firms and advisors about the potential of BrokerCheck to mislead the public, the board authorized Finra to seek comment on excluding information about deceased individuals and about individuals unregistered since 1999 in the database.
It also told Finra to seek comment on a database modification that would let firms include in BrokerCheck their comments about arbitration awards they have been ordered to make to customers.
The proposed culling of purportedly outdated information and giving firms’ latitude to comment on awards was not welcome by at least one critic of BrokerCheck.
“What is the basis for allowing a broker to insert such self-serving statements in the disclosure record without allowing the customer to insert a statement about how sleazy the broker and brokerage firm was,” Craig McCann, head of Securities Litigation and Consulting group, an expert witness firm that works on behalf of investors wrote in an email.
The proposal to delete data on deceased and unregistered brokers would make BrokerCheck “substantially less informative” by eliminating registration information on as much as half of the 1.2 million registered individuals in the database, he said. He also said that it would help firms that hire a disproportionately high number of brokers with disclosure events avoid public scrutiny.
Reached after business hours on Monday, a Finra spokeswoman said she could not immediately comment on McCann’s remarks.
Separately, the self-regulatory organization’s board authorized Finra to seek comment on a rule that that would permit remote examinations of some branches in order to help the regulator and firms more efficiently allocate compliance budgets.
Technology would be deployed to allow examiners to remotely inspect offices where “only low-risk activities take place,” the Finra board wrote in a summary of its actions at the quarterly meeting. Low-risk branch offices are those that do not handle customer funds or securities and that have no more than three brokers, all of whom must have clean disciplinary records, according to the proposal.
By creating fewer distractions and lowering exam costs, the remote inspections would also allow member firms to “reallocate compliance resources to activities that pose greater risks to investors,” Finra President and Chief Executive Robert Cook wrote in an introduction to the board update.
Any new or modified rule proposals made by Finra following a review of comments require approval from the Securities and Exchange Commission before they would become effective.