Welcome to Financial Advisor IQ

SEC Chair Open to Review of BrokerCheck

By Rita Raagas De Ramos May 23, 2018

SEC chairman Jay Clayton reacted Tuesday to a query regarding his opinion on what many broker-dealers consider to be an invasion of their privacy by Finra’s BrokerCheck and the use of the tool for investor protection by saying it was “a very good question” and leaving the door open to potential changes to information that needs to be disclosed.

Speaking about the SEC’s own experience, Clayton said the watchdog previously reviewed the personal identifiable information (PII) contained in its Edgar automated document filing system and whether the information was relevant.

Edgar – the SEC’s Electronic Data Gathering, Analysis and Retrieval system – performs automated collection, validation, indexing, acceptance and forwarding of submissions by companies and others that are required by law to file forms with the SEC.

“To the extent that we didn’t need the PII, we’ve amended our forms to eliminate that,” Clayton said during a fireside chat session with Finra CEO Robert Cook at the self-regulator’s annual conference in Washington, D.C.

Clayton was responding to a query from a conference attendee.

“I haven’t gone through an analysis of what PII is appropriate for BrokerCheck, or not. But that’s a good question,” he told the audience member who raised the issue.

Cook chimed in by saying: “It’s a legitimate question. Times evolve, expectations evolve.”

Cook explained, however, that the information on BrokerCheck comes from Finra’s Central Registration Depository (CRD).

BrokerCheck serves as a tool for investors and other interested parties to conduct a background check on their broker-dealers and broker-dealer firms.

BrokerCheck’s reports on broker-dealers include information such as employment history, professional qualifications, disciplinary actions, criminal convictions, civil judgments and arbitration awards. BrokerCheck's reports on broker-dealer firms include information on a firm’s profile, history, operations and disclosures.

The information in the CRD “satisfies Finra and state requirements,” Cook said. “All information that’s available on BrokerCheck is pursuant to rules. What goes in the database is not just a Finra decision but also satisfies state registration requirements.”

Cook noted that the BrokerCheck is “of great interest to many of our members” and a “hotly debated issue.”

Jay Clayton

Many broker-dealers have voiced the opinion that because even unfounded customer or employer complaints can be included in BrokerCheck records, they can indeed be more harmful than helpful. But Finra believes BrokerCheck’s potential to save investors from unscrupulous broker-dealers more than makes up for any broker-dealer having a false claim listed in their record.

Cook assured conference attendees that the Finra board is “looking at how to strike the right balance” between what’s available on BrokerCheck and investor protection.