FINRA on BrokerCheck and Broker Compensation

The Financial Industry Regulatory Authority has sent its proposed rule change regarding BrokerCheck links to the U.S. Securities and Exchange Commission. Per the new measure, a broker-dealer would have to make sure that a BrokerCheck link is made accessible on its home page. The firm would also have to make sure links to the FINRA database are visible on the profile pages of its brokers.

The Commission will have to approve the rule, which was modified after concerns were raised about the original version, which called for BrokerCheck links to also be included in posts on social media websites, including Twitter. A broker would also have had to provide direct links to his/her individual BrokerCheck profile pages.

The revised version doesn’t require providing the links on social media, and any links to BrokerCheck only must take people to the home page of the firm’s site and not an individual rep’s profile.

Aside from increasing traffic to BrokerCheck, the measure is intended to grow investor awareness of the web resource, BrokerCheck allows them to look into a broker’s background for any claims or allegations against the representative.

In other FINRA news, the self-regulatory organization has just put out a revised proposal for another rule, which should help investors understand whether any financial incentives compelled their broker to go to a new firm. Per the rule, broker-dealers would have to send “educational communication” to investors of any brokers making a move to that firm. The document would provide questions that customers should ask their brokers about incentives so they can decide whether the inducements posed a conflict of interest and if it will cost them anything to follow the broker to the new firm.

The broker compensation proposal was first submitted by FINRA to the SEC last year but was withdrawn due to industry opposition.

With the original version of the rule, brokers would have had to disclose to customers any incentives over $100,000 that they were given for going to a new firm. The broker-dealer would also have to notify the SRO about any significant compensation increases for new brokers. FINRA is open to getting public comments about this latest version of the proposal for a limited amount of time.

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Finra sends BrokerCheck link rule to SEC, Investment News, May 28, 2015

New FINRA Broker Bonus Rule Out ‘Fairly Soon’: Ketchum, Think Advisor, March 17, 2015

FINRA Gets Tough With Its Sanctions Against Brokers For Suitability Violations, Stockbroker Fraud Blog, May 15, 2015

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