(Recasts throughout to add background, details)
By Sarah N. Lynch
WASHINGTON, April 16 Wall Street's self-funded
regulator said on Wednesday it will consider proposing mandatory
background checks for brokers after critics pointed to gaps in
disclosures by some with checkered histories.
The announcement by the Financial Industry Regulatory
Authority (FINRA) comes at a time when the regulator is facing
heightened scrutiny from legal groups and the media over the
quality of its online disclosure system.
FINRA's BrokerCheck service is a free tool meant to help
investors carefully choose a broker.
The database contains information about each registered
broker's employment history. It also gives details about legal
troubles such as whether a broker is facing any criminal or
civil investigations into potential misconduct.
Last month, the Public Investors Arbitration Bar Association
released a critical analysis which found that BrokerCheck does
not provide as much disclosure as some state regulators about
employees with prior legal troubles.
The association's report came out about the same time that
the Wall Street Journal raised deeper concerns. The newspaper
revealed that the records of more than 1,600 stockbrokers failed
to disclose critical information about bankruptcy, criminal
charges and other red flags.
Such information is supposed to be disclosed in FINRA's
In an announcement on Wednesday, FINRA said its board would
convene an April 24 meeting to consider "requiring firms to
adopt written procedures that are reasonably designed to verify
the accuracy and completeness of the information" that is
disclosed in BrokerCheck.
A FINRA spokeswoman declined to comment beyond the public
announcement which can be found here: here
In addition to reviewing a proposal to require background
checks of brokers, FINRA said its board will consider expanding
the categories of who is eligible to serve as an arbitrator to
help make decisions in disciplinary proceedings, among other
(Reporting by Sarah N. Lynch Editing by W Simon and Tom Brown)