Posted in: FINRA |
FINRA, formerly the National Association of Securities Dealers, announced that it will be expanding the amount of broker-specific information that will be available on its site. Specifically, the BrokerCheck system will permanently keep certain information, such as criminal conviction, on a broker’s profile. Information about brokers who leave the industry will be on the site for ten years as opposed to the current two. Likewise, all broker-related complaints since 1999 will be added to BrokerCheck.
Predictably, the head of FINRA predicted that these changes will help protect investors.
“This additional information will benefit investors who are considering whether to conduct, or continue to conduct, business with a particular securities firm or broker,” 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.”
Overall, it’s better that BrokerCheck will be improved. But let’s see how long it takes these changes to be implemented. Let’s see if they are completed by the end of 2010 as has been promised. In addition, these changes don’t address some of the ongoing problems with BrokerCheck. It’s a difficult system to navigate and information about brokers isn’t updated sufficiently quickly.
Most importantly, BrokerCheck doesn’t address the enormous disparity in knowledge and power between brokers and most of their clients. Brokers are trained sales people; they are good at establishing trust with people who are on the whole less financially sophisticated than they are. The proposed changes to BrokerCheck are similar to the requirements imposed on fast food restaurants to post nutritional information. The evidence is that the nutrional requirements don’t impact the behavior of the people who walk in to McDonalds. Once you walk through thoe doors, you are unlikley to look up how much salt has been added to your combo meal. Likewise, once most people start talking to a broker they don’t pause to review BrokerCheck and those who do aren’t well positioned to understand the results. It’s not as if the new changes will require brokers to provide every new and potential cliient updated information about fines and other forms of discipline. That kind of reform might actually alter the behavior of people who trust their money to brokers.
Unfortunately, the proposed improvements to BrokerCheck will do nothing to change the fact that filing a lawsuit or abitration is often the only effective way to get a bad broker’s attention.
