The Financial Industry Regulatory Authority (Finra) has won approval from the Securities and Exchange Commission (SEC) for a major expansion of its BrokerCheck service - to make records of final regulatory actions against brokers permanently available to the public, regardless of whether they continue to be employed in the securities industry.
Under current rules, a broker's record generally becomes unavailable to the public two years after he or she leaves the securities industry and is therefore no longer under FINRA's jurisdiction.
Disclosure records for former brokers will be available on BrokerCheck beginning November 30.
"This is an important step for investors and for investor protection," said FINRA Chairman and CEO Richard Ketchum. "Individuals previously barred by FINRA and other regulators have surfaced in a number of recent frauds in other parts of the financial industry that cost unsuspecting investors millions of dollars. It has never been more critical for investors to research the backgrounds of the financial professionals they deal with than it is today."
"It is possible that a (former broker) could become a financial planner or work in another related field where his securities record would help members of the public decide if they should accept his financial advice or rely on his advice or expertise," the SEC said in its order approving the BrokerCheck expansion. It added that providing information on final regulatory actions against former brokers "will help members of the public to protect themselves from unscrupulous people and thus....should help prevent fraudulent and manipulative acts and practices, and protect investors and the public interest."
BrokerCheck is a free online service through which investors can instantly see the employment, qualifications and disciplinary history of more than 650,000 brokers under FINRA's jurisdiction. FINRA estimates there are more than 15,000 individuals who have left the securities industry after being the subject of a final regulatory action and whose disciplinary history is not currently available on BrokerCheck.
Records for those individuals will become available on November 30 and will include any final sanction (such as bars, suspensions and fines) imposed by the SEC, the Commodity Futures Trading Commission, any federal banking agency, the National Credit Union Administration, any other federal regulatory agency, any state regulatory agency, any foreign financial regulatory authority or any self-regulatory organization (such as FINRA). Those individuals' records generally will also disclose administrative information such as employment and registration history, the individual's most recently submitted comments and the dates and names of qualification examinations passed by the individual.
In many cases, final regulatory actions against an individual can be found in various places on the Internet, including by searching FINRA's own Web site. That information will now be easily and centrally accessible through BrokerCheck.
In 2008, individuals used BrokerCheck to conduct 11.6 million reviews of broker or firm records. Investors can access BrokerCheck at www.finra.org/brokercheck or by calling (800) 289-9999.
FINRA, the Financial Industry Regulatory Authority, is the largest independent regulator for all securities firms doing business in the United States. FINRA is dedicated to investor protection and market integrity through comprehensive regulation. FINRA touches virtually every aspect of the securities business - from registering and educating all industry participants to examining securities firms; writing and enforcing rules and the federal securities laws; informing and educating the investing public; providing trade reporting and other industry utilities; and administering the largest dispute resolution forum for investors and firms.