Finra will release information more quickly about brokers who are fired under a rule approved by the Securities and Exchange Commission.
The current 15-day waiting period will be reduced to three business days for posting information from Form U5, which brokerages use to report the dismissal of brokers. The notice is published on BrokerCheck, a public database maintained by the Financial Industry Regulatory Authority Inc. that contains background about brokers, including their disciplinary history. The change will go into effect on Dec. 12.
The 15-day delay was originally instituted to give brokers a chance to explain why they had been booted from a firm. But Finra determined that making the termination notice public more quickly was necessary to better inform investors considering hiring the broker.
“Finra believes that a three-business-day waiting period is more reasonable than a 15-day period because it allows investors to more quickly access disclosure information reported on Form U5 while at the same time still providing brokers the opportunity to comment on the reported disclosure event,” states the
Finra regulatory notice published on Nov. 30.
The quicker turnaround on the termination information presents compliance challenges, said Peter Mafteiu, principal at Sound Compliance Services.
“It puts a lot of pressure on the firms and the compliance officers to make sure that the termination is accurately explained in the U5,” Mr. Mafteiu said.
He said the efficacy of speeding the release of information on
BrokerCheck is ultimately limited because so few investors use the database to research brokers.
“I really don't see how it helps the consumer,” Mr. Mafteiu said of the rule change.
