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The Financial Industry Regulatory Authority (FINRA) regulates US broker-dealers, a “self-regulatory organization” run by the brokers themselves and overseen by the SEC. A very popular online resource is called BrokerCheck, which lets you pretty easily check the regulatory history and licenses held by broker-dealers and individuals who are licensed brokers in those companies. Frankly, I use it quite a lot. Now, to make that information more transparent, FINRA has requested, and the SEC has approved, a requirement to include a “readily apparent reference and hyperlink” to BrokerCheck on the home page of the broker’s site where retail investors go.
This proposed rule has actually been around in different forms for 3 years. Prior versions would have required the link be included in all of a broker’s social media sites, but they got rid of that in the final version. The original proposal also required the link to go right to a broker’s actual history whereas the final rule just takes them to BrokerCheck’s home page.
Is BrokerCheck perfect? It doesn’t include customer arbitration claims that are settled, for example. So if you have dozens of claims and pay people off, your future customers may not know about it. But in fairness, if you settle and don’t admit any liability why should it be held against you? These are the tough questions of course. But overall, this seems like a fair middle ground to make it easier for investors to access information about their potential brokers without overburdening the already heavily regulated US brokerage industry.
Read additional articles at the David Feldman Blog.
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