FINRA BrokerCheck Decision Increases Investor Transparency, Provides Fairness to Financial Advisors

September 24, 2012

The Financial Services Institute (FSI) today announced another advocacy victory following the most recent FINRA Board of Governors Meeting when amendments to the BrokerCheck Disclosures did not include making financial advisors’ test scores for tests taken on a pass/fail basis public on the system.

FSI took a strong stance against the posting of the scores noting that doing so would be unfair to advisors who had taken the test to pass, not competing to earn the highest score. FSI also noted that the scores would not directly benefit investors due to the pass/fail scoring system. In the end, FINRA is moving towards more transparency for investors and less confusion, but not moving the goalpost on advisors – a win, win for all involved.

“We laud FINRA for increasing transparency while not moving the goalpost on financial advisors by publicly posting test scores taken on a pass/fail basis,” said FSI President & CEO Dale Brown. “The posting of these scores would have negatively impacted advisors who took the test to pass, not competing to earn the highest score. And access to these scores would only lend confusion to investors as there is no correlation between a score earned on a pass/fail exam and the quality of the advice provided by an advisor. Most importantly, this is a glowing example of how constructively engaging regulators with the unified voice of over 35,000 financial advisors can be productive and create a positive outcome for advisors and investors alike.”

Below is the list of rulemaking items that were discussed during the September 2012 FINRA Board of Governors Meeting:

Investor Use of BrokerCheck Information

  • The Board authorized staff to file with the SEC proposed amendments to facilitate and increase investor use of BrokerCheck information. Proposed amendments to FINRA Rule 2267 (Investor Education and Protection) would require member firms to include a reference and a link to BrokerCheck on their websites and on certain websites maintained by, or on behalf of, any person associated with a member firm.
  • Amendments to FINRA Rule 8312 (FINRA BrokerCheck Disclosure) would permanently make publicly available in BrokerCheck information about investment-related civil actions brought against associated persons by a state or foreign regulatory authority that have been dismissed pursuant to a settlement agreement, and would allow for data downloads of BrokerCheck information as approved by the Board.
  • The Board voted to seek further comment via a Regulatory Notice on the debt research conflicts of interest proposal, particularly with respect to revised exemptions for research distributed to institutional investors and for firms with limited investment banking and principal debt trading activities. The Board also approved for filing with the SEC proposed amendments to NASD Rule 2711 (Research Analysts and Research Reports) to make conforming and other changes related to the JOBS Act.