FINRA Proposes Disciplinary Disclosure of Former Brokers

The Financial Industry Regulatory Authority (FINRA) is proposing a major expansion of its BrokerCheck service—to make records of final regulatory actions against brokers permanently available to the public, even if they’ve left the securities industry.

Under current rules, a broker’s record generally becomes unavailable to the public two years after he or she leaves the securities industry and is therefore no longer under FINRA’s jurisdiction, FINRA said in a news release.

FINRA said it filed its rule proposal with the Securities and Exchange Commission (SEC) late last week. The SEC will publish the proposal in the Federal Register and solicit public comment in the near future.

BrokerCheck is a free online service through which investors can instantly see the employment, qualifications, and disciplinary history of more than 650,000 brokers under FINRA’s jurisdiction. FINRA estimates there are more than 15,000 individuals who have left the securities industry after being the subject of a final regulatory action and whose disciplinary history is not currently available on BrokerCheck.

“It has never been more critical for investors to research the backgrounds of the people who approach them with investment proposals,” said Richard Ketchum, FINRA Chairman and CEO, in the release. “Individuals previously barred by FINRA and other securities regulators have surfaced in a number of recent frauds responsible for millions lost by unsuspecting investors. Investors should be able to check if the financial professional they’re dealing with has been the subject of a disciplinary action by regulators.”

FINRA points out that, in many cases, final regulatory actions—such as bars, suspensions, and fines—against a particular individual can be found in various places on the internet, including FINRA’s own Web site, by searching individual monthly disciplinary reports. FINRA’s proposal would make that information centrally accessible through BrokerCheck.