FINRA Focuses Attention on BrokerCheck

Selecting a broker to invest hard-earned money can be a nerve-racking thought to many investors. With news headlines focused on the lingering results of the economic crisis and financial scandals that left many penniless, it has never been more important for investors to find a broker they can trust. Continue reading

Selecting a broker to invest hard-earned money can be a nerve-wracking process for many investors. With news headlines focused on the lingering results of the economic crisis and financial scandals that left many penniless, it has never been more important for investors to find a broker they can trust.

Luckily, there is a resource that might give them some peace of mind. In 1998, FINRA (the Financial Industry Regulatory Authority) established the website BrokerCheck as a tool for investors researching the record of a firm and its brokers. The website features professional background information on approximately 1.3 million current and former FINRA-registered brokers and 17,400 current and former FINRA-registered brokerage firms. BrokerCheck lists terminations, complaints, lawsuits and even personal bankruptcies, with the mindset that past behaviors are both telling and predictive of future behaviors.

The Dodd-Frank Act, passed in 2010 in response to the financial crisis, required regulators to make the website more user friendly and accessible. Regulators are concerned that although BrokerCheck is readily available for anyone to use, not enough people are aware of this tool. To encourage more investors to use the site, a year ago FINRA proposed a regulation that would require brokerage firms to include on their websites and social media feeds a link to FINRA’s BrokerCheck website. But many people were up in arms about this proposed rule change. After receiving dozens of comments, the filing was withdrawn in order to re-write and re-introduce it later this year with an inclusion that would require firms to describe BrokerCheck in a “prominent location”.

This renewed focus on the BrokerCheck website falls in line with FINRA’s actions to focus on prosecuting recidivist brokers, or those who have multiple complaints, disclosures and abuses on their record. A big step in curbing these behaviors that could harm the securities industry is to encourage well-informed investors.

 

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