Making a buck on brokers' disclosures

Thu Apr 12, 2012 12:00pm EDT
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By Suzanne Barlyn

(Reuters) - Nervous brokers are worried that Wall Street's top regulator could let companies use details about their professional backgrounds for commercial ventures.

What many do not realize is that state regulators already make that information available to companies that do everything from marketing to providing research services for investors. Handing over details has been a longstanding practice, but brokers worry that some information could be wrong.

Now the Financial Industry Regulatory Authority, or FINRA, Wall Street's industry-funded regulator, wants the industry's view on a possible change that could make disclosures to companies such as marketers and recruiters even easier - an idea that has brokers on edge.

The controversy erupted this month in response to a FINRA request for public input about a range of possible improvements to its free online disclosure system, known as BrokerCheck.

Investors can use the service to research brokers' backgrounds, including their employment and disciplinary histories. Brokers, however, are sensitive about that information because details about customer complaints and disciplinary actions could be wrong, they say. Moreover, commercial users, such as marketers, are not required to fix mistakes.

State public information laws require many state regulators to disclose information about brokers' professional histories when companies ask. The practice could deflate the brokerage industry's arguments that FINRA should not sell information it includes in a database of nearly 630,000 brokers.

FINRA is not required to provide the same details that states must provide. As a private entity, it is not subject to state or federal laws requiring the production of certain government documents to the public.

"I can't control 50 states, but certainly FINRA should not be complicit in encouraging use for commercial purposes," said Raymond Thompson, senior vice president at Dorsey & Company Inc, a New Orleans-based wealth management firm.   Continued...