Financial industry regulators are hoping to enact a rule this year that would make it easier for investors to find out if a broker pushing to sell them a stock, bond or other investment product has a clean record.
A year ago, the Financial Industry Regulatory Authority proposed a regulation that would require brokerage firms to include on their websites and social media feeds a link to the Finra BrokerCheck website, an online database that keeps a record of any disciplinary actions and securities arbitrations involving a registered investment adviser. The proposal was intended to make it easier for investors to research the background of a firm and its brokers before doing business with them
The rule was submitted the Securities and Exchange Commission for approval last January. But Finra, the brokerage industry’s self-regulatory agency, withdrew the measure in April to fine-tune it after receiving more than two dozen outside comments.
A person briefed on the matter, who was not authorized to speak about the matter, said Finra intends to reintroduce a revised version of rule later this year that would require investment firms to include a “prominent description†of BrokerCheck to encourage investors to visit the website.
“We have to change the level of public awareness about BrokerCheck,†said Richard Ketchum, Finra’s chairman and chief executive.
BrokerCheck, established in 1998, is the main public repository for the recording of disciplinary actions, arbitration and lawsuits filed against a broker or a firm. The Dodd-Frank Act, passed in response to the financial crisis, required regulators to develop way to make the free website more user friendly and more accessible to investors.
Mr. Ketchum, in an interview on Thursday, said increasing the visibility of BrokerCheck is in keeping with Finra’s push to more aggressively bring enforcement cases against brokers with multiple disciplinary violations.
In 2013, the industry regulator said it took actions to expedite enforcement actions against so-called recidivist brokers. And this year, Finra says it will create a dedicated enforcement team to prosecute those cases and to investigate whether firms that hire recidivist brokers are doing adequate due diligence.
