Compliance & Oversight

Four Groups Challenge SEC to Override FINRA

Claim an urgent need to improve information under 'Brokercheck;
Says FINRA “Misleads Investors” About “Obtaining Complete and Adequate Information”

WASHINGTON, D.C. – July 15, 2015 – The Securities and Exchange Commission (SEC) should require fuller disclosure of information to investors under the FINRA BrokerCheck Reports system and also develop a unified national disciplinary database allowing older Americans and other investors to check out the backgrounds of financial market professionals.

This is according to a letter submitted today to the SEC Investor Advisory Committee (IAC) by the Public Investors Arbitration Bar Association (PIABA), Public Citizen, the PIABA Foundation, and the Securities Arbitration Clinic of the St. John’s University School of Law.

In the joint letter available online at, the four groups point out that FINRA currently is conducting a national advertising campaign that inaccurately suggests that the FINRA BrokerCheck Reports provide complete information about brokers to investors.

Call for full disclosure of broker backgrounds

The group urges the SEC to remedy the situation by requiring full disclosure of all publicly available background information about financial professionals.

The letter concludes: “… FINRA actively encourages investors to use BrokerCheck so they can make informed decisions about their brokers. FINRA also requires firms to notify investors repeatedly about the availability of BrokerCheck. Nevertheless, FINRA then fails to provide complete and adequate information about their brokers. FINRA has chosen not to further expand BrokerCheck in an effort to protect the interests of its members in the securities industry, rather than the investors it has promised to protect. Accordingly, the SEC should exercise its regulatory authority and require FINRA to harmonize the information on BrokerCheck Reports with the information already publicly available from states similar to Florida with broad public records laws. BrokerCheck Reports should, like Florida, only exclude personal information such as social security numbers, home addresses, etc. There is simply no valid reason why the same … information is a public record at the state level but is not publicly available from FINRA.”

In March 2014, PIABA released a report detailing how FINRA omits critical information from its BrokerCheck Reports even though the information is publicly available from some state securities regulators in the form of CRD Snapshot Reports.

Information should jibe with that of states

This happens even though the information contained in BrokerCheck Reports and CRD Snapshot Reports are derived from the same database. The PIABA Report correctly concluded that FINRA’s BrokerCheck Reports should be harmonized with the reports from states that provide the most information so that all investors have equal access to the same important background information.

On June 1, 2015, FINRA launched a national ad campaign promoting BrokerCheck. In so doing, FINRA described its BrokerCheck Reports as “FINRA’s free online tool that allows investors to access information about every broker’s employment history, certifications and licenses, as well as regulatory actions, violations or complaints made against them.”

The release also states that BrokerCheck can be used to avoid hiring “bad brokers”, saying that if investors are to avoid “leap-before-you-look mistakes when choosing a broker—they should use BrokerCheck.”

BrokerCheck Reports should, like Florida, only exclude personal information such as social security numbers, home addresses, etc. There is simply no valid reason why the same … information is a public record at the state level but is not publicly available from FINRA

Attorney Jason Doss, a letter signer and co-author of the 2014 PIABA report, said: “There is no question FINRA portrays BrokerCheck Reports as important, accurate and comprehensive. Despite FINRA marketing efforts, FINRA continues to omit material information about brokers in its BrokerCheck Reports even though this same CRD information is publicly available from many state securities regulators. FINRA does not alert investors that more complete information is available from other sources. The lack of complete information in FINRA’s BrokerCheck Reports has the potential to mislead investors into believing that all relevant information has been disclosed when it has not.”

The joint letter continues: “In contrast to the states with the most comprehensive disclosure of information, FINRA exercises it statutory authority to exclude information contained in CRD Snapshot Reports. To date, it appears FINRA’s rationale for not disclosing the same amount of information as these states is based on ‘personal privacy and fairness’ to FINRA members. This rationale, however, is flawed given that the same information excluded from the BrokerCheck Reports is already publicly available from these states. Moreover, FINRA has designated itself as an advocate for investor protection, and, as a result, the SEC should mandate FINRA place the interests of the investing public above any vague notion of privacy or fairness to the financial advisors entrusted with clients’ life savings and retirement accounts.”


One glaring omission in BrokerCheck files is information about terminations. According to the groups: “It is important for consumers to know all reportable facts and circumstances surrounding brokers’ terminations from their firms. For example, investors considering whether to hire a new broker to manage their life savings have a legitimate interest in knowing whether that person has been fired from a previous firm and the circumstances surrounding that termination. In addition, existing customers commonly follow terminated brokers to their new firm(s) and they certainly have a legitimate need to know this information to be able to determine whether the broker is trustworthy.”

The groups also are concerned about past information that is either never reported or omitted after a period of time.

“Certain information that was, but is no longer required to be, reported through the registration and licensing process is not disclosed through BrokerCheck. This information includes, for example, judgments and liens originally reported as outstanding that have been satisfied and bankruptcy proceedings filed more than ten years ago. Reasonable investors would have good cause not to engage or hire a broker who has demonstrated that he or she cannot properly manage their own finances. For example, a reasonable investor would want to know whether their financial advisor has ever filed for bankruptcy, not just in the last 10 years. Similarly, reasonable investors would also want to know if their broker has ever had IRS tax liens levied against them or judgments that arise from, for example, a breach of duty.”

The four groups also are concerned that FINRA withholds information about examination scores on industry tests, failed exams, and internal reviews from its Brokercheck Reports.

Read the complete letter to the Securities & Exchange Commission here.



Published by The Hastings Group. Contact Patrick Mitchell at (703) 276-3265 or