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FINRA Seeks To Widen Investor Use of BrokerCheck

During the February 13, 2014 FINRA Board of Governors (“Board”) meeting, the Board discussed possible rule proposals related to its BrokerCheck database. According to FINRA’s Website, “BrokerCheck is a free tool to help investors research the professional backgrounds of current and former FINRA-registered brokerage firms and brokers, as well as investment adviser firms and representatives.”

Currently, the rule is that once a year brokers are required to provide customers the BrokerCheck hotline number and FINRA website address in writing. The problem with BrokerCheck is that many investors are unaware of its existence and as a result do not review it prior to choosing a registered representative or firm to handle their accounts. FINRA is attempting to remedy that issue.

The Board advanced a proposal that would require brokerage firms to post a readily apparent link to BrokerCheck on their websites in order to make it more accessible to retail investors. FINRA has been in the process of trying to find a way to widely publicize BrokerCheck to retail investors. For example, in April 2013, FINRA withdrew a proposed rule change to amend FINRA Rule 2267 (Investor Education and Protection). That rule proposal sought to require members to include a description of and link to BrokerCheck on their websites, social media pages, and any other comparable Internet presence relating to a member’s investment banking or securities business. One issue with the rule proposal that was withdrawn in April 2013 was that it was too costly to implement and monitor.

If you are an investor seeking to open an account with a member firm or registered representative, you may check their disclosures by accessing FINRA’s BrokerCheck database.

Lax & Neville has extensive experience in successfully prosecuting claims on behalf of customers who have suffered losses. Additionally, Lax & Neville LLP has nationally represented small broker-dealers, financial services professionals and securities industry companies in regulatory matters and securities-related and commercial litigation. Please contact our team of attorneys for a consultation at (212) 696-1999.

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