The Financial Industry Regulatory Authority has proposed an expansion of its BrokerCheck service that would make records of final regulatory actions against brokers permanently available.
In a regulatory filing with the Securities and Exchange Commission late last week, FINRA said that although a broker may no longer work in the securities industry in a registered capacity, he "may work in other investment-related industries or attain other positions of trust and about whom investors may wish to learn relevant securities-related disciplinary information."
Currently, a broker's record generally is publicly available for only two years after he leaves the securities industry.
"It has never been more critical for investors to research the backgrounds of the people who approach them with investment proposals," said FINRA chairman and chief executive officer Richard Ketchum. "Individuals previously barred by FINRA and other securities regulators have surfaced in a number of recent frauds responsible for millions lost by unsuspecting investors. Investors should be able to check if the financial professional they're dealing with has been the subject of a disciplinary action by regulators."
FINRA said in a press release that there are 650,000 brokers under its jurisdiction, but more than 15,000 individuals have left the securities industry after being the subject of a final regulatory action and whose disciplinary history is not currently available on BrokerCheck. The self-regulator also said individuals used BrokerCheck to conduct 11.6 million reviews of broker or firm records last year.
The proposal will be subject to public comment once it is published in the Federal Register, after which the SEC would need to approve it before it is implemented.