FINRA Seeking Increased Investor Use of BrokerCheck

During the week of Sept. 10, 2012, the FINRA Board of Governors (“Board”) met to consider, among other things, rule proposals to expand the information publicly available in BrokerCheck. Following the meeting, Rick Ketchum, Chairman and CEO of FINRA, issued a brief letter outlining what the BrokerCheck rule proposals will contain.¹ Mr. Ketchum stated that the amendments would focus on increasing “investor use of BrokerCheck information” through amendments to FINRA Rule 2267 (Investor Education and Protection) and Rule 8312 (BrokerCheck Disclosure). 

• Rule 2267 would be amended to require FINRA member firms to include a reference and link to BrokerCheck on their websites. In addition, member firms would be required to maintain the reference and link on related websites “maintained by, or on behalf of, any person associated with a member firm.”
• Rule 8312 would be amended to make information regarding investment-related civil actions brought by state or foreign regulatory authorities against associated persons of a member firm permanently and publicly available in BrokerCheck, even if such actions have been dismissed as a result of a settlement agreement. 
• Rule 8312 also would be amended to allow certain Board-approved data to be downloaded from BrokerCheck.

Although Mr. Ketchum stated that the Board authorized FINRA staff to file the proposed amendments with the SEC, he did not indicate when those proposals might be issued.

BrokerCheck is an invaluable public resource for information on member firms and their associated persons. FINRA has focused on maximizing the use of BrokerCheck over the past few years and likely will continue with this effort. Recently, in 2010, the SEC approved amendments to FINRA Rule 8312 to expand the information publicly available in BrokerCheck to include: (1) all historic customer complaints that became non-reportable after the implementation of Web CRD; (2) information regarding former associated persons of a member firm for certain types of criminal or civil actions in which the person was involved; (3) expand the period of required disclosure concerning a former associated person under BrokerCheck from two to 10 years; and (4) codify FINRA’s process for disputing the accuracy of information disclosed in Broker-Check.²

In February 2012, FINRA issued a request for comment on “ways to facilitate and increase investor use of BrokerCheck information.”³ The request sought comment on various issues such as types of information that should be added or removed from BrokerCheck and whether it would be useful to investors if FINRA included links to other relevant websites in BrokerCheck reports. The notice also requested comment on whether a representative’s educational background or professional designations should be available in BrokerCheck, and whether terms used in BrokerCheck are difficult to understand. In addition, the notice sought comment on the format and content of BrokerCheck, methods to increase investor awareness of BrokerCheck and allowing BrokerCheck information to be provided to for-profit companies for commercial use. We understand FINRA continues to review and consider the comments received.

Most recently, in May 2012, FINRA made several changes to BrokerCheck in an effort to improve navigation of the site for access to broker-dealer and investment adviser information. In addition, FINRA made changes to address recommendations made by the SEC in a study mandated by the Dodd-Frank Act.⁴ These changes included providing:

• Centralized access to licensing and registration information on current and former representatives and member firms, investment advisers and investment adviser representatives;
• The ability for BrokerCheck users to search for a financial services professional based on main office and branch office locations, and to conduct zip code radius searches; and
• Access to expanded education content available on BrokerCheck, including help icons that clarify terms used throughout the system and within BrokerCheck reports.

FINRA members should be aware of the impending proposed amendments and the possible requirements that may result.  In addition, broker-dealers should continue to track developments as FINRA works to enhance and expand the role of BrokerCheck as a public resource.

*This alert was co-authored by Robert Buhlman, W. Hardy Callcott and Margaret Blake.

Contacts

If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:

Burke-Timothy
Blake-Margaret
Boch-David
Kroll-Amy

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¹ See Letter to Executive Representative, from Richard G. Ketchum, Chairman and CEO, FINRA (Sept. 14, 2012).
² See Exchange Act Release No. 62476 (July 8, 2010) [75 FR 41254 (July 15, 2010)] (Order Approving File No. SR-FINRA-2010-012).
³ See Regulatory Notice 12-10 (February 2012).
⁴ See Study and Recommendations on Improved Investor Access to Registration Information About Investment Advisers and Broker-Dealers, As Required by Section 919B of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Jan. 2011).