New PIABA Study on BrokerCheck: Does the Service Provide Enough Information to Protect Investors?

By Timothy Guilmette, Spring 2014 Student Intern

On March 6, 2014, the Public Investors Arbitration Bar Association (PIABA) released a study concerning the amount of information disclosed on the Financial Industry Regulatory Authority’s (FINRA) BrokerCheck reports in comparison to state regulatory filing services.  This post will serve as a starting point to discuss what FINRA BrokerCheck is and what information it discloses, as well as generally discussing PIABA’s findings.

What is BrokerCheck?

BrokerCheck is a free tool investors can use to research the professional backgrounds of certain financial professionals, including brokers and investment advisers.  BrokerCheck’s information is gathered from the Central Registration Depository (CRD) database.  BrokerCheck allows investors to search basic information about a broker or brokerage firm’s past.  Among the information available, investors can obtain background reports, whether a broker was terminated, licenses the broker holds, customer complaints and disciplinary actions.

PIABA Study Findings on BrokerCheck

PIABA’s new study states that BrokerCheck lacks critical information for investors that some state regulatory agencies are already using even though FINRA has access to that information.  Moreover, PIABA believes that the current information listed on BrokerCheck reports is not detailed enough.  For instance, BrokerCheck provides information on a broker’s licenses, but does not list the broker’s test scores.  Additionally, BrokerCheck lists whether a broker was terminated from employment but does not provide the reason.  The report contends that this information is of critical importance for investors and should be included in BrokerCheck reports.

According to a recent Reuters article, Florida’s Office of Financial Registration already employs a system where citizens have access to reports containing reasons for termination, passing and failing exam scores.  PIABA believes that this and other information available through the CRD should be reported on FINRA’s BrokerCheck reports since it is already available to FINRA and is important to investors.

PIABA’s study is sure to spark debate on the balance between the importance of providing investors with detailed information and that of protecting broker’s individual rights.