Securities Law Blog

The Financial Industry Regulatory Authority (FINRA) has announced that it will be making significant changes to its free, online BrokerCheck service before the end of 2010. FINRA will be casting a wider net to expand the information made available to the public about current and former securities brokers.

The expansion will increase the number of customer complaints reported publicly and extend the public disclosure period for the full record of a broker who leaves the industry within the ten preceding years. Complaints dating back to 1999, when electronic filing of broker information began, will be available. These complaints will include customer complaints, regulatory actions, arbitrations and litigations.

Currently, a broker’s record is publicly available for two years after he or she leaves the securities industry. The expanded BrokerCheck will make a former broker’s record public for ten years, enabling investors to access information about individuals who may work in other sectors of the financial services industry.

Investors will benefit from the additional information when deciding whether to begin or continue their business with a particular broker or firm, said FINRA Chairman and CEO Rick Ketchum. “Just as important, it will provide valuable information about persons who have left the securities industry, often not of their own accord, who have established themselves in other segments of the financial services industry and can still cause great harm to the investing public.”

Last year, BrokerCheck started making information about regulatory action such as bars, suspensions and fines, against former brokers permanently available to the public. The more comprehensive version will include additional information reported to FINRA since 1999. The additional information will include reportable 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 alleged sales practice violations.

Current and former brokers will be able to submit a written notice of dispute to FINRA with all supporting documentation, if they believe the information to be inaccurate or out of date. A notation signifying the broker is disputing the information will be posted to the broker’s BrokerCheck report, and removed following an investigation.

The first wave of changes will come in late August, when all historic complaints will be added to current and former broker’s reports. By the end of the year, full records for any broker registered within the last 10 years will be public, and all permanent information will be added to the appropriate broker reports.