Compliance January 28, 2011

SEC Recommends Unifying B/D, Adviser Searches

In response to a mandate from the Dodd-Frank Act to investigate investor access to information on broker/dealers (B/Ds) and registered investment advisers (RIAs), the Securities and Exchange Commission (SEC) has recommended that one search provide access to both.

Reported by

Nicole Bliman

The Dodd-Frank Act specifically asked the SEC to include an analysis of the advantages and disadvantages of centralizing access to BrokerCheck, the free B/D search tool offered by the Financial Industry Regulatory Authority (FINRA) and the Investment Adviser Public Disclosure (IAPD), the free RIA search tool on the SEC Web site.

In the report, “Study and Recommendations on Improved Investor Access to Registration Information About Investment Advisers and Broker-Dealers,” the SEC said it would be advantageous for investors to receive a unified search result when using either BrokerCheck or IAPD. This would assist investors to “more easily obtain the data they need to make informed decisions regarding financial services providers.”

The report included two additional recommendations. One said the search functions on BrokerCheck and IAPD should be expanded for investors to search by ZIP code or other location indicator; that way, side-by-side comparisons of local financial professionals can aide in the decision on which is the best fit. (Currently, an investor has to enter part of the name of the company or adviser in order to obtain any information.) The report also recommends that educational content on each site be upgraded to include definitions of investment terms and the significance of different licensing levels.

The Dodd-Frank Act also required that any recommendations made in the report be implemented 18 months after the study was released. Because of this timeframe, further structural changes to BrokerCheck or IAPD will have to wait until the three recommendations made in the report are finalized. The two databases will remain separate – but investors will receive a unified search return regardless of which database they use.

To see the complete SEC report, click here.

In recent weeks, the SEC has published two other major reports, as mandated by the Dodd-Frank Act. They include investigations into whether B/Ds should be held to a fiduciary standard, (see “SEC Report Leaves Unanswered Questions“), and whether RIAs need an expanded oversight system, (see “SEC Publishes Report about RIA Oversight“).