Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

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Wednesday, February 17, 2010

FINRA Proposes to Expand Publicly Available Information about Brokers

FINRA is seeking authority to significantly expand the amount of information available to the public on current and former securities brokers through its free online BrokerCheck service.  The proposed expansion – which FINRA will submit to the SEC in the near future – would increase the number of customer complaints reported publicly; extend the public disclosure period for the full record of a broker who leaves the industry from two years to 10 years; and, make certain information about former brokers available permanently, such as criminal convictions and certain civil and arbitration judgments.

 Specifically, FINRA's proposed expansion of BrokerCheck would:

  • Disclose all "historic" complaints against a broker dating back to 1999, when electronic filing of broker information began. Generally, historic complaints are customer complaints, arbitrations or litigations more than two years old that have not been adjudicated or have been settled for an amount less than the reporting requirement (currently $15,000). They are currently reported on BrokerCheck when the broker has three or more currently disclosable regulatory actions, customer complaints, arbitrations, litigations or historic complaints. The new proposal would disclose all historic complaints dating back to 1999 for individual brokers who are currently registered or whose registrations were terminated within the preceding two years. If the SEC approves the entire package of BrokerCheck expansion proposals, the reporting of historic complaints would apply to brokers whose registrations were terminated within the preceding 10 years.
  • Expand the disclosure period for former brokers. Currently, a broker's record is publicly available for two years after he or she leaves the securities industry. That two-year period coincides with the period in which an individual remains subject to FINRA's jurisdiction and within which an individual can return to the industry without having to take requalifying exams. The new proposal calls for making a former broker's record public for 10 years, so investors can access information about individuals who may work in other sectors of the financial services industry or who have attained other positions of trust.
  • Further expand the amount of information that is permanently available on former brokers. Last year, BrokerCheck started making information about final regulatory actions (i.e., bars, suspensions, fines, etc.) against former brokers permanently available to the public. The new proposal would make additional information permanently available – including criminal convictions or pleas of guilty or nolo contendere; civil injunctions or findings of involvement in a violation of any investment-related statute or regulation; and arbitration awards or civil judgments based on the individual's involvement in an alleged sales practice violation.

http://lawprofessors.typepad.com/securities/2010/02/finra-proposes-to-expand-publicly-available-information-about-brokers.html

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