BrokerCheck’s Impact on Customer Complaints

In January 2013, the Federal Register reported that FINRA has proposed a new rule that  would require broker / dealer firms to include on their website, a description of and link to BrokerCheck in order for customers and potential customers to have easy access to perform background checks on the specific brokers with whom they are working for investment purposes.    Currently, FINRA requires broker / dealers to provide the BrokerCheck hotline number and FINRA website address to their customers in writing; however, prior to this rule, a direct link from the broker / dealer’s website was not required.  BrokerCheck is an online source of information on brokers, their background, types of practice and whether they have previously been disciplined by FINRA or other regulators.

FINRA has indicated that this proposed rule will increase investor awareness and allow investors to make more informed changes about the individuals and firms with whom they conduct business.  Although this would be ideal, the reality is that investors already have the ability to perform background checks on those with whom they conduct business, but often elect not to for a variety of reasons.  Furthermore, just because the BrokerCheck link is accessible to customers does not mean that customers will take advantage of this accessibility, especially senior investors that may not be familiar with a broker / dealer’s website or otherwise fluent with online background checks.  Therefore, even though the BrokerCheck link will be more accessible to customers, the customers must still take advantage of the accessibility provided to them.

This rule will, however, have a significant impact on customer complaints resolved by way of FINRA arbitrations.  In cases involving brokers with prior complaints or regulatory matters, customers often complain that the broker / dealer failed to disclose the broker’s prior to investments being made.  With the requirement that the BrokerCheck link be accessible through a broker / dealer’s website, those broker / dealers will be able to argue that background information on their brokers was made available to customers through the website.  Furthermore, FINRA is making a clear statement through this rule that customers have some responsibility for researching those with whom they conduct business, otherwise, FINRA would have gone a step further and required the broker / dealers to print off the broker’s BrokerCheck report and provide it to clients, rather than provide access to BrokerCheck through their websites.  Hopefully this is a sign of further rules in the future that will place some burden or responsibility upon investors with respect to their investment decisions, rather than having blind faith in everyone else to make the right decisions for them, with no responsibility imposed upon them.


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