Financial industry regulators are hoping to enact a rule this year that would make it easier for investors to find out if a broker pushing to sell them a stock, bond or other investment product has a clean record.
A year ago, the Financial Industry Regulatory Authority proposed a regulation that would require brokerage firms to include on their websites and social media feeds a link to the Finra BrokerCheck website, an online database that keeps a record of any disciplinary actions and securities arbitration involving a registered investment adviser. The proposal was intended to make it easier for investors to research the background of a firm and its brokers before doing business with them.
The rule was submitted to the Securities and Exchange Commission for approval last January. But Finra, the brokerage industry’s self-regulatory agency, withdrew the measure in April to fine-tune it after receiving more than two dozen outside comments.
Finra intended to reintroduce a revised version of rule this year that would require investment firms to include a “prominent description” of BrokerCheck to encourage investors to visit the website, according to a person who was briefed on the matter but not authorized to speak about it publicly.
“We have to change the level of public awareness about BrokerCheck,” said Richard Ketchum, Finra’s chairman and chief executive.
BrokerCheck, established in 1998, is the main public repository for the recording of disciplinary actions, arbitration and lawsuits filed against a broker or a firm. The Dodd-Frank Act, passed in response to the financial crisis, required regulators to develop ways to make the free website more user friendly and more accessible to investors.
Mr. Ketchum, in an interview on Thursday, said that increasing the visibility of BrokerCheck was in keeping with Finra’s push to bring enforcement cases against brokers with multiple disciplinary violations.
In 2013, the industry regulator said it took actions to expedite enforcement actions against so-called recidivist brokers. Finra says it will create a dedicated enforcement team this year to prosecute those cases and investigate whether firms that hire recidivist brokers are doing adequate due diligence.