DEFENDING YOUR PROFESSIONAL INTEGRITY
Stay current on recent changes in the regulatory environment
FINRA just released the new version of BrokerCheck to the public.
Firstly, you will notice that the previous format has been updated to a more fluid and modern look. In addition to merely cosmetic changes, FINRA has made some not-so-subtle changes to the format and placement of broker details that may catch the attention of brokers that have meritless customer complaints or U5 terminations.
Immediately after the requisite identifying data (broker name, firm and address) the next adjacent section is occupied by the number of disclosures the broker has. With a larger font size, accompanying “!” exclamation point icon, and highlighted in bright yellow versus the tame blue-green tones of the page, this section is designed to bring a customer’s eye directly and immediately to it. Tenure of the broker and number of firms they have worked for is then compactly placed next in line.
*You can view your current BrokerCheck profile here.
Additionally, instead of being a horizontal graph located two-thirds of the way down the page where a user would previously have to scroll, the details of the disclosures are now on a vertical timeline graph encompassing nearly the entirety of the page. Dotted with alarming red spots indicating the timing of customer complaints (larger red dots for clustering).
FINRA is not only pushing forward in their goal to have the public utilize BrokerCheck before deciding on any financial advisor but it is obvious that the highlighting of these disclosures (with or without merit) is their primary objective. It appears they are making good on their promise to draw greater attention to unfavorable indicators such as customer disputes, short tenure, and lack of licensure with various states.
With the resignation of FINRA enforcement chief, Bradley Bennett, and potential management changes at the SEC, 2017 will be an interesting year to see what lengths FINRA will continue to go to in order to shine a spotlight on financial advisors with disclosures.
Make your New Year’s Resolution to clean up meritless customer complaints and U5 entries from your BrokerCheck profile. With many BDA/AFG accounts filling up come January 1st, this is a great time of year to spend resources on protecting your professional image and integrity so that your business can continue to grow.
EA, Executive Vice President
3400 Industrial Lane, Unit 10A
Broomfield, CO 80020
FINRA Inquiry or Investigation
When FINRA conducts a “sweep” of your broker-dealer, an email will be sent to your compliance department with a list of reps. The list contains CRD numbers and the findings of the “sweep” which either were not present in the CRD system, or do not align with what was present in the CRD system.
Compliance will then send an email to each rep with the findings of the sweep. The email will innocuously ask that you provide an explanation of the discrepancies between the CRD system and your CRD. Seemingly harmless, most reps will respond with information and explanations of why the CRD and public record do not align. Such responses are the starting point for FINRA Member Regulation or Enforcement Division’s formal inquiry or formal investigation. Due to the potential license revocations, suspensions, fines, and sanctions which ultimately result from FINRA inquiries and investigations, I encourage you to engage counsel prior to responding to the request for clarification from your compliance department.
The next meaningful piece of correspondence is a letter to you with an “Examination No. 201612345678” in the “RE:” line. The letter will ask very specific questions about the items uncovered in the “sweep.” In addition it will likely state that it “should not be construed as an indication that FINRA or its staff has determined that any violations of federal securities laws or FINRA, NASD, NYSE, or MSRB rules have occurred.” Should you or a colleague receive such a letter, it must be taken seriously and speaking with an expert attorney promptly is highly advised.
Frivolous Customer Disputes
There are few mysteries when it comes to customers making baseless allegations for the purpose of obtaining a nuisance settlement from a rep’s broker-dealer. But similar to FINRA regulatory actions stemming from inquiries and investigations, even wholly fabricated customer disputes result in a permanent mark on the rep’s CRD and BrokerCheck profile.
How does E&O help me?
How much will it cost me to engage adequate counsel to save my career? This is the question that quickly surfaces for reps facing an inquiry or investigation. Granted, the cost of counsel pales in comparison to the financial devastation caused by a suspension, revocation, and the permanent mark which will be on your CRD and BrokerCheck profile. Nonetheless, many E&O providers provide partial or full reimbursement to help reps cover the expenses associated with defending against allegations and meeting the overwhelming requirements imposed upon reps by FINRA.
If you happen to find yourself in a situation like those described above, and in need of effective and affordable counsel, contacting AdvisorLaw early on is a good decision. AdvisorLaw has a dedicated team of attorneys and staff that exclusively represent brokers caught in the crosshairs of FINRA or a litigious client, or previously marred by disclosures which are viable for expungement from the CRD system. Contact me today if you or a colleague is facing unwanted attention by regulators or angry clients.
See our commentary in InvestmentNews here.
President, Managing Attorney
3400 Industrial Lane, Unit 10A
Broomfield, CO 80020
Main Ph: (303) 952-4025
Fax: (720) 452-0613
This blog is my ongoing effort to inform and educate FINRA licensed professionals about the evolving regulatory ecosystem in which we operate.