(Adds comment from FINRA in ninth paragraph about Wall Street
Journal story; comments from lawyer Terry Weiss in 12th and 13th
By Suzanne Barlyn
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 on Thursday.
FINRA does not go as far as some U.S. state securities
regulators do in providing disclosures to investors, the group
said in a report that 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
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.
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
The group's study follows another problem for FINRA: A Wall
Street Journal investigation published late on 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.
FINRA is also considering ways to curb the types of
disclosure problems described by The Wall Street Journal, a
FINRA spokeswoman said. "Any reporting failure is unacceptable
and subject to discipline," she said, noting the regulator is
looking into technologies that would help it cross-check various
databases to improve oversight.
FINRA oversees nearly 636,000 brokers and 4,100 brokerages.
More than 75 percent of state securities regulators refer
investors to BrokerCheck from their websites, FINRA said.
Some lawyers who represent brokerages say the BrokerCheck
expansion PIABA is proposing goes too far. "This may be the only
profession where this level of background information is
required to be disclosed publicly," said Terry Weiss, a lawyer
for Greenberg Traurig LLP in Atlanta.
While disclosure may be favorable, that does not mean that
public disclosure of a broker's personal information should be
limitless, Weiss said in an email. Some old customer complaints
that appear on brokers' records give the misleading perception
that the allegations were proven, when they were not, Weiss
(Reporting by Suzanne Barlyn; Editing by Cynthia Osterman and