Background Check On Financial Advisors May Be Improved
The Financial Regulatory Authority (FINRA) has proposed an important potential change to a rule that relates to what information the general investing public can find out about stockbrokers and other financial professionals. Currently, the public can obtain only an incomplete disciplinary record on a stockbroker either by contacting their state securities regulator (a state-by-state listing can be found , or by logging onto the FINRA website . One major flaw in this process, however, is that the public can only learn what the broker or brokerage firm is required to disclose, which does not include the entire history of a financial advisor's rule violations or other misconduct.
FINRA recently released a proposed rule that would help to remedy this shortcoming. Under the proposed amendment, registered brokerage firms would be required to report allegations of rule violations against individual brokers made in arbitration filings and civil lawsuits in which the broker is not named as a defendant. Under current rules, a firm may avoid reporting the broker unless he or she is actually a party. The proposed rule was heralded by investor protection advocates as a major step forward. For example, Karen Tyler, President of the North American Securities Administrators Association, said, "we applaud the joint efforts of the states and FINRA, working together, to produce this important proposal, which will help protect investors from unscrupulous brokers."
FINRA should announce finally whether the rule will be adopted some time in the summer or fall of this year.
