If the SEC has its way, more disciplinary information about brokers will be available to investors.
If the SEC has its way, more disciplinary information about brokers will be available to investors.
The Securities and Exchange Commission's Draft Strategic Plan For Fiscal Years 2010-2015, released Oct. 8, includes as one of its goals a little-noticed provision to make public more background information on employees of brokerage firms.
“Anytime the SEC moves toward more public disclosure of the backgrounds of reps or advisers, that's a good thing,” said Joseph Brady, associate general counsel of the North American Securities Administrators Association Inc.
But as welcome as the SEC's long-range plan is, state regulators and claimants' attorneys said the commission's expected approval of a plan to expand the BrokerCheck system is letting the Financial Industry Regulatory Authority Inc. off the hook.
The proposal before the SEC would make all information about regulatory actions against brokers part of their permanent Broker-Check record. That is expected to be approved within a month.
But Finra's proposal does not include making information on former brokerage employees' criminal convictions, bankruptcies, judgment liens, etc., available permanently, Mr. Brady argued. “We think they should go further,” he said.
A PUSH FOR MORE?
While the SEC's strategic plan does not include details about what additional information would be made available, the agency indicated that it may push for more.
“We expect to continue to work with Finra to enhance the availability and scope of professional background information on broker-dealer personnel so that investors will be able to make better-informed decisions about their brokerage relationships,” said David Shillman, associate director of the Office of Market Supervision in the SEC's Division of Trading and Markets.
Claimants' attorneys complain that public information about registered representatives and investment adviser representatives is inadequate.
Indeed, one former broker who is now a securities arbitration attorney offers himself as an example.
William Gladden, who operates a securities arbitration law firm under his own name, said that while he was employed by AIG Retirement Advisors Inc. from 1992-2007, the firm, now VALIC Financial Advisors Inc., twice paid clients for errors he made inadvertently. That information is not on Finra's BrokerCheck system.
In one instance, Mr. Gladden said, the company paid one of his clients about $5,000 for a transaction error he caused. In another instance, the company paid a client an un-known sum because he failed to disclose annuity surrender charges.
Although he acknowledged his own mistakes, Mr. Gladden said the fact that those items aren't on Finra's BrokerCheck system is an example of why the system should include more disclosures. “I know from personal experience they don't report everything,” he said.
“VALIC Financial Advisors Inc. is focused on its customers and meets all Finra disclosure requirements regarding customer complaints,” company spokesman Linda Skolnick wrote in an e-mail. The company “also has in place policies and procedures to ensure a timely response to all customer complaints,” she wrote.
PROPOSAL DEFENDED
Finra officials defended the proposal to limit BrokerCheck to regulatory actions.
“Regulatory-action information is trusted information,” said Jay Cummings, executive vice president of registration and disclosure.
“It's the most meaningful of the information; it's the most accurate. Whether a person had a judgment, a lien or a bankruptcy 20 years ago is not terribly relevant, but a judgment by a regulator is,” Mr. Cummings said.
He said that Finra constantly re-evaluates its BrokerCheck system and is willing to consider expanding it further.
A system to make information about investment adviser representatives more easily available is forthcoming as well.
NASAA expects to have its Investment Adviser Public Disclosure Individual system in operation by next spring. That system would provide the public with a nationwide database for disclosures about in-vestment adviser representatives.
Currently, investors must check with individual states' securities regulatory offices to get such information.
E-mail Sara Hansard at shansard@investmentnews.com
