Dirt for investors to dig, if they can find it

Tue Feb 28, 2012 2:31pm EST
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By Suzanne Barlyn

(Reuters) - Ongoing efforts by regulators to give the public more details about financial advisers' backgrounds still haven't solved a key problem -- getting more investors to use that information.

The Financial Industry Regulatory Authority recently took a step toward resolving that issue. In a notice on Tuesday, FINRA invited suggestions from the public on possible improvements to its free online disclosure system, known as BrokerCheck.


Information available through BrokerCheck has been expanded several times in recent years. Individual reports about brokers, for example, now include links to disciplinary action taken against them, which is available in a separate database that FINRA launched in May. Records about brokers who leave the brokerage industry, and who may take on other financial advisory roles, are now available going back 10 years instead of two.

But many investors seek that information too late.

"Very few people read it until after there's a problem," said William Jacobson, a professor at Cornell Law School's Securities Law Clinic in Ithaca, New York.

Even then, the public reports don't include some information that only securities industry members and regulators can see, such as details about a broker's firing, he said.

According to a 2009 study FINRA cited in its notice, only 15 percent of respondents said they checked out their adviser's background with a state or federal regulator. The actual number may be even lower, industry sources said.   Continued...

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