The Financial Industry Regulatory Authority (FINRA) has withdrawn a proposal designed to make it easier for investors to research the backgrounds of brokerage firms and brokers, but said it would refile the planned rule.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 (FSI), in a statement on Wednesday.
The Washington-based trade group represents independent broker-dealers.
"The FINRA proposal was unworkable," Melissa MacGregor, associate general counsel for the Securities Industry and Financial Markets Association (SIFMA), said in a statement.
Both SIFMA and FSI will continue to work with FINRA on as solution, the groups said.
"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. She made the remarks in a February 15 letter to the SEC.
Investor advocates have praised the idea of requiring brokerages to link their sites directly to BrokerCheck.
"Providing investors easy access to disciplinary information is a high priority and it is an area where firms do not currently appear to do a good job," said Barbara Roper, director of investor protection for the Consumer Federation of America, in a statement on Wednesday. "I hope that this is just a temporary setback and that FINRA will be back with a revised proposal in the near future."