iPIABA released on March 6, 2014 its Report entitled “The Inequality of Investor Access to Information,” an attack on the FINRA BrokerCheck program that provides the public with access to employment, registration, and other information about registered representatives and FINRA member firms. The Report announces a call for Congressional action to force FINRA to expand BrokerCheck to provide more information in parity with that which is presently publicly available through the states.
Since 1981, FINRA has maintained the Central Registration Depository (“CRD”) as a single nationwide computer system to make public employment, registration, and disciplinary histories on securities professionals and member firms. Section 15A of the Securities Exchange Act requires FINRA to make information contained in the CRD database available to the public. To comply, FINRA uses a toll-free telephone number and the BrokerCheck website. The BrokerCheck website is a free resource for the investing public to retrieve information quickly on an individual registered broker.
PIABA’s Report attacks FINRA for marketing the BrokerCheck website as a “comprehensive” database, and for strongly encouraging investors to use BrokerCheck as their source of information on their financial advisors. While FINRA markets BrokerCheck as the go-to source of information, PIABA takes issue with the fact that in some isolated cases there may be more broker information available to an investor through state securities regulators. BrokerCheck is highlighted on the FINRA website, and the public is referred to the website as a source of information, but FINRA does not emphasize that investors may also seek information from state securities regulators.
The Report, however, is at best inconclusive. Indeed, the authors admit that they looked at no more than a tiny thimble of available BrokerCheck data and did not examine data about the approximately 1.3 million current and former FINRA-registered brokers. The authors instead appeared to have cherry-picked four examples of broker information available from the state system but allegedly not through BrokerCheck, and declared those extreme examples to be representative of a purported fundamental problem of inadequate disclosure. PIABA and the other speakers during today’s related press conference were unable to point to any instance of specific investor harm from the current BrokerCheck, which may not be surprising since the information is available publicly through other means.
The securities industry may be the only profession where this kind of information is required to be disclosed publicly. Although PIABA seems to take the position that more disclosure is always better, the Report does not consider that information may be misleading when not presented in context to those who may be unfamiliar with the securities industry. For example, disclosure of an unfounded accusation of misconduct against a broker is more likely to mislead investors into thinking there was truth to the allegation than to help them choose the right broker for them. The current BrokerCheck endeavors to limit such confusion by being more circumspect in what is required to be disclosed. PIABA’s Report is available here.
