FINRA withdraws plan requiring broker disclosure link
April 24 (Reuters) - The Financial Industry Regulatory Authority (FINRA) has withdrawn a proposal designed to make it easier for investors to research the backgrounds of brokerage firms and brokers, but said it would refile the planned rule.
FINRA's proposal, originally filed with the U.S. Securities and Exchange Commission in January, would have required brokerages to include a link on their website to FINRA's free online disclosure database known as "BrokerCheck."
The rule would have also applied to firm-related social media pages, such as those on Facebook and Twitter. Some industry comments sent to the SEC said this portion of the rule would be a challenge to implement.
"We withdrew the filing in order to give further consideration to the comments received in response to the SEC's publication of the proposed rule change," a FINRA spokeswoman said in a statement provided to Reuters. "We plan to refile."
FINRA, Wall Street's industry-funded watchdog, filed a notice with the SEC on April 18 to withdraw the proposal.
In their comment letters to the SEC, some brokerage executives said they were concerned, among other things, about how to apply the proposed BrokerCheck disclosure requirement in the context of social media. In those letters, they said they supported efforts to make BrokerCheck information more widely available to investors.
"There is simply no way in many cases for a link to BrokerCheck to be prominently displayed on social media sites and, therefore, the rule is impossible to implement," said David Bellaire, general counsel of the Financial Services Institute, a Washington-based trade group for independent broker-dealers. The group hopes to work with FINRA to develop a "workable solution," Bellaire said in a statement on Wednesday.
"If applied too broadly, the rule would effectively prohibit broker-dealers from participating in certain social media channels," wrote Melissa Callison, vice president of compliance for Charles Schwab & Co Inc, a unit of Charles Schwab Corp . Setting up and maintaining a link to BrokerCheck would not be practical or possible in some contexts, Callison wrote in a letter to the SEC dated Feb. 15.
Investor advocates met the original proposal with praise. "It is part of a broader campaign to focus on more informed investor choice," Barbara Roper, director of investor protection for the Consumer Federation of America, said when FINRA sent its rule to the SEC in February.
But Roper acknowledged in an interview in early April the industry concerns about implementing the planned disclosure on certain social media sites. "If it's really about figuring out the logistics and not opposing the proposal, that's fine," Roper said. Efforts to contact Roper on Wednesday were not immediately successful.