September 8, 2009
Any further effort to hide broker complaints from the public is counter-productive for FINRA, the SEC and any other regulatory organization seeking to protect the investing public.
Over the past 20 years, our law firm has represented thousands of investors in claims against registered representatives and their firms. Several months ago, I forwarded a lengthy letter on point. I will summarize:
First: Why even have BrokerCheck if it would report only snippets of information about a particular individual. Not only would its purpose therefore NOT be served, but this would actually further shelter those with multiple complaints by lulling members of the public into a false sense of security, believing their broker is problem-free when the opposite may actually be true.
Second: There are a half-million registered persons at 5,000 brokerage firm in the U.S. Yet, an average of less than 5,000 arbitration claims are filed per year, one per brokerage firm and one per 100 brokers. Yet, only a minority of such claims is ever actually reported on Broker-check. Please, enforce the current rules
Third: More importantly, the vast majority of brokers are honest, have a good relationship with their clients and have few if any complaints despite decades of service. Why not reward these persons with a truly clean record, rather than lump them with those who have a record showing no complaints when the opposite is true?
Fourth: I note that FINRA is advertising heavily to guide the public to BrokerCheck. It is uncanny that FINRA would do so while seeking to limit the information actually found there.
Fifth: Those who have problems paying on time would love to limit such incidents on their credit report to a couple of years instead of 8 to 10 years. If financial institutions have a "need to know" for this period, why wouldn't the rest of us have the same need to know about those working for such financial institutions?
Last: For decades firms have stated that the securities industry is clean except for a few "rogue" brokers. While their original premise has recently been called into question, why shouldn't the industry have a goal of exposing those with problems who damage their image rather than sweeping these under the rug?
William S Shepherd
Managing Partner
Shepherd Smith Edwards Kantas, LLP