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SEC Approves Rule Requiring Brokerage Firms to Link to BrokerCheck

Brokerage Firms | West Palm Beach False Claims Act

The Financial Industry Regulatory Authority, also known as “FINRA,” provides a public database that investors can use to research their brokers’ professional background and disciplinary history.  Investors can learn important information such as:

  • Whether the broker has been sued by other investors;
  • If so, how much the broker paid to settle those suits;
  • Whether the broker has been arrested;
  • Whether the broker has been fired by previous firms;
  • How many times it took the broker to pass various licensing exams.

The database is publicly available here or investors can request a copy of a BrokerCheck report by calling (800) 289-9999. It’s not perfect, but it can be an important tool for investors in choosing who will manage their money.

This tool is vastly under-utilized and under-publicized in our view.  As lawyers who represent investors, we frequently find clients who are shocked and dismayed to learn that there longtime trusted broker has been sued multiple times in the past for exactly the same conduct that has been committed against them.   These investors are equally shocked to learn that this information was available to them on the internet.

Shouldn’t the brokerage firms be required to tell investors about BrokerCheck, so that investors can make an informed decision before selecting a broker?  We think so.

Now the SEC agrees.  In December 2015, the SEC approved a rule amendment that will require all brokerage firms to include a hyperlink to BrokerCheck in a “readily apparent” location on the firm’s main website page.  The change will come by way of an amendment to FINRA Rule 2210 dealing with communications with the public. You can see FINRA’s Regulatory Notice 15-50 and the complete text of the amended rule by clicking here.

We believe the new rule could have gone further.  In particular, many brokers advertise themselves by way of their own individual webpages.  We believe the rule would have done more to protect investors had it required hyperlinks to the specific BrokerCheck reports for those individual brokers on all such individual promotional pages.

Nonetheless, the new rule is a positive step in the right direction.   The new rule becomes effective June 16, 2016.

Our law firm advises all investors to check out their broker at BrokerCheck or by calling (800) 289-9999.