| March 6
March 6 Congress should pass legislation
requiring Wall Street's industry-funded watchdog to plug
significant gaps in the disclosure system it uses to present
brokers' backgrounds to investors, a group of investor lawyers
said in a report released on Thursday.
FINRA does not go as far as some U.S. state securities
regulators do in providing disclosures to investors, the group
said. The report raises questions about whether the Financial
Industry Regulatory Authority's BrokerCheck service provides all
the information investors need to choose a broker.
For example, BrokerCheck does not typically disclose
specific reasons why a broker was fired or bankruptcies from
more than 10 years ago, the Public Investors Arbitration Bar
Association (PIABA), which developed the study, said.
That is the case even though FINRA and states both retrieve
their information from a larger database that the industry and
regulators use to research brokers' pasts, PIABA said. [ID:
"Immediate legislative change is needed to prevent consumers
from being misled into believing that BrokerCheck reports are
comprehensive when they are not," PIABA wrote in the report.
The group's study follows another problem for FINRA: A Wall
Street Journal investigation published late Wednesday found that
the public records of some 1,600 brokers failed to include
criminal charges and other problematic issues that should have
been in their files. (link.reuters.com/dak47v)
"BrokerCheck is the only free online tool of its kind
available to the public 24 hours a day, seven days a week," a
FINRA spokeswoman said in a statement. "While the system may not
be perfect, we do have to make determinations on what
information about registered representatives is appropriate to
release, while at the same time balancing fairness rather than
ignoring it," she said.
The FINRA spokeswoman declined to immediately comment on the
Wall Street Journal's story.
FINRA, the group alleges, has ignored multiple requests to
include the same breadth of information in BrokerCheck that
appears in the larger database it runs, known as the Central
FINRA oversees nearly 636,000 brokers and 4100 brokerages.
More than 75 percent of state securities regulators refer
investors to BrokerCheck from their websites, FINRA said.
(Reporting by Suzanne Barlyn; Editing by Cynthia Osterman)