January 30, 2013
-This comment is in response to File Number SR-FINRA-2013-002. FINRA has proposed several amendments and additions to their BrokerCheck online system. The impetus for these changes is a study that the SEC conducted on increasing the public investor's access to and awareness of the background and disciplinary history of brokers and firms. An additional study by FINRA showed that only 14% of investors who have used a financial professional in the past five years used or even knew about BrokerCheck.
The problem with BrokerCheck is that even if an investor tried to use the website, it is so confusing and repetitive that whatever information is there gets lost in the morass of repetition. Each entry is entered three times. It makes the broker seem like an inveterate rule breaker, when it might have been just one innocuous violation. The average investor will not be able to decipher the true meaning of those entries and will eventually give up trying.
As far as the firm's BrokerCheck page, how is an investor to understand the import of TRACE or OATS violations? Those technical violations have nothing to do with clients they are minor violations that can occur because of computer glitches or human error. But, their entry three times for each violation is confusing and for the most part irrelevant to the investor.
Prior to any requirement that BD's place a jump site to their BrokerCheck page on their web page, FINRA should be required to make it simpler and easier to read. As it is now it is useless to the investor and almost as useless to the broker dealer community.
Additionally, the information that FINRA has proposed and has already included can be immensely misleading. They have decided to place in the background of a broker all customer complaints including those that were non-adjudicated as well as those that may have been withdrawn or abandoned by the customer. Those non-adjudicated entries are akin to spreading rumors, because no court or arbitration panel has ever ruled on the veracity of the claims. These entries should be removed.
There should also be a time limit as to how long these entries should remain. There are violations that go back 20 or 30 years. How useless are those?
I have no problem with displaying the regulatory history of a broker or his/her firm, but that information should be accurate, timely, true, non-redundant and easy to read. Those upgrades by FINRA should be done before we waste investors' time by telling them to look at undecipherable gibberish.