FINRA and SEC Approve New Broker Check Mandate

The Securities and Exchange Commission (SEC) and FINRA have approved a rule change aimed at increasing usage and visibility of the BrokerCheck system, FINRA’s database of broker background information.

On June 29, 2015, the Financial Industry Regulatory Authority (FINRA) filed with the SEC a proposed rule change to amend FINRA Rule 2210, which dictates broker communications with the public. The proposed rule change was published for comment in the Federal Register on July 13, 2015, and subsequently approved by SEC on October 8.

According to the SEC, nine comment letters were received on the relatively straightforward proposed rule change, which requires each of a registered broker/dealer’s member websites to include “a readily apparent reference and hyperlink to BrokerCheck.” Full details are in the text of the rule change, but commenters generally support FINRA’s proposal and some even recommended that the proposal be expanded and include additional requirements. However, FINRA will not be expanding the requirements in the near term, it says, because it believes doing so would be overly burdensome for broker firms.

One commenter asked FINRA for a requirement to include “deep links” that would take a client or prospect directly to the relevant broker’s information within the FINRA BrokerCheck system, but this requirement was not added, because “most investors should be able to find information concerning particular members and registered representatives without difficulty given the ease of operation of the BrokerCheck search feature,” SEC explains. 

FINRA also states that, while the proposed rule does not require deep links, it does not prohibit members from using deep links.

The SEC further explains a link to BrokerCheck must be displayed, at a minimum, on the initial webpage that the registered member intends to be viewed by individual investor clients, and on any other webpage that includes a professional profile of one or more registered persons who conducts business with retail investors.

SEC and FINRA suggest these requirements “would not apply to a member that does not provide products or services to retail investors, or to a directory or list of registered persons limited to names and contact information.”

FINRA will announce the implementation date of the proposed rule change in a Regulatory Notice to be published no later than 60 days following SEC’s approval. The effective date will be no later than 180 days following publication of the Regulatory Notice announcing SEC approval.