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PIABA Claims that FINRA is Withholding Critical "Red Flag" Information in Broker Background Check Disclosures to Investors


By Brent A. Burns, Esq.


Today the Public Investor Arbitration Bar Association issued a press release about a study urging congress to pass legislation requiring brokers to reveal more information from the CRD system than is currently available on FINRA's BrokerCheck. Much of this same information is already publicly available through some state regulators.

The study was co-authored by Jason Doss, President of PIABA; Christine Lazaro, Director of the Securities Arbitration Clinic at St. John's University School of Law; and Benjamin P. Edwards, Director of the Investor Advocacy Clinic at Michigan State University College of Law.

"Investors go to BrokerCheck to get information about their broker. They should not have to then follow-up with their state securities regulator to possibly obtain additional, relevant information about that broker that is already in FINRA's possession. They should be able to get all of the relevant information from one central location," said Lazaro.
"All investors should be able to obtain complete and consistent information about brokers. Period. The quality of the disclosure you get about brokers should not depend on which state you live in. There is no rational basis for FINRA to hide key 'red flag' information that investors in some states can get from state-level agencies. Given that FINRA has failed repeatedly to take action to increase the disclosures in BrokerCheck,Congress and the SEC need to compel them to do so if necessary," said Doss.

As reported by OnWallStreet, PIABA claims the key information left out of the BrokerCheck reports but included in reports from state securities agencies includes:


  • Whether a broker has filed for personal bankruptcy.

  • The reason why a broker may have been fired from a firm.

  • Whether a broker was ever under internal review for fraud.

  • If there is a federal tax lien filed against a broker.

  • If a broker failed any industry qualification examinations.

In response, FINRA said "While the system may not be perfect, we do have to make determinations on what information about registered representatives is appropriate to release, while at the same time balancing fairness rather than ignoring it."

The self-regulatory organization was also reported to have said that it has committed considerable resources to make BrokerCheck, which is a free service, a more user-friendly interface that quickly provides investors with information on the background of brokers. See OnWallStreet

The story was also reported in the Wall Street Journal and Reuters.

Prior to the press release, the Wall Street Journal had already reported earlier this morning that their own analysis shows more than 1,600 stockbrokers have bankruptcies or criminal charges in their past that weren't reported.

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Brent A. Burns, Esq. represents individual and institutional investors as well as financial services professionals in arbitrations and litigations and maintains the Law Offices of Brent A. Burns, LLC with offices in New York City and Alpine, New Jersey.

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This page contains a single entry from the blog posted on March 6, 2014 5:03 PM.

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