FINRA Proposes More BrokerCheck Expansions

More specifically, FINRA is seeking approval to increase the number of customer complaints reported publicly; extend the public disclosure period for the full record of a broker who leaves the industry from two years to 10 years; and make certain information about former brokers, such as criminal convictions and certain civil and arbitration judgments, available permanently.

FINRA will submit the BrokerCheck proposal to the Securities and Exchange Commission (SEC).

More specifically, the expansion to the free BrokerCheck service would disclose complaints against a broker dating back to 1999, when electronic filing of broker information began. FINRA said “historic complaints” are customer complaints, arbitrations, or litigations more than two years old that have not been adjudicated or have been settled for an amount less than the reporting requirement ($15,000). They are currently reported on BrokerCheck when the broker has three or more currently disclosable regulatory actions, customer complaints, arbitrations, litigations, or historic complaints. The new proposal would disclose all historic complaints dating back to 1999 for individual brokers who are currently registered or whose registrations were terminated within the preceding two years. Under the BrokerCheck expansion proposals, the reporting of historic complaints would apply to brokers whose registrations were terminated within the preceding 10 years.

Right now, a broker’s record is publicly available for two years after he or she leaves the securities industry. The new proposal calls for making a former broker’s record public for 10 years, so investors can access information about individuals who may work in other sectors of the financial services industry or who have attained other positions of trust, FINRA said. “Recent regulatory and criminal proceedings in the financial services sector reveal that former brokers have been engaging in fraud and other misconduct long after establishing themselves in other segments of the financial services industry,” said FINRA Chairman and CEO Rick Ketchum, in a statement.

Last year, BrokerCheck started making information about final regulatory actions (i.e., bars, suspensions, fines, etc.) against former brokers permanently available to the public (see “FINRA Gets OK to Expand BrokerCheck”). FINRA said the new proposal would make additional information permanently available—including 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 an alleged sales practice violation.