Rulebook

FSI Skeptical About FINRA BrokerCheck Rule Feasibility

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Will FINRA’s proposed rule requiring firms to link to their publicly available BrokerCheck records increase investor awareness? The Financial Services Institute remains unconvinced, contending the regulator needs to perform a cost-benefit analysis and weigh alternative options.

“FSI is skeptical that requiring BrokerCheck links on websites, and especially on social media sites, will in fact increase traffic and investor awareness of BrokerCheck,” FSI’s executive vice president and general counsel David Bellaire wrote in Thursday’s public comment letter.

Under the proposed rule, firms would need to include a clear reference and hyperlink to BrokerCheck on each of its websites available for access by investors. Firms would also be required to include links on all communications to investors and anything firms post on third-party websites, including embedding links on advisor profiles.

But amid industry criticism, FINRA eased off some of the more taxing components of its proposed rule (Reg 14-19) in January. Firms now would not need to provide a reference or hyperlink in emails, text messages or posts to online interactive forums. Instead, firms and their advisors using social media would only be responsible for including a link to BrokerCheck advisor in the profile area on sites like Twitter and Facebook, as well as in the summary page on directories like LinkedIn. Firms would not be responsible for adding links to third-party websites they had no involvement in or control over, according to the proposal.

But even after the revision, FSI still contends adding the BrokerCheck link to all of the firm’s associated websites, as well as all of the advisors’ sites and social media pages would be “extremely difficult or impossible to implement from an operational standpoint and logistical perspective.”

FSI also pointed out that the substantial amount of advisor movement from firm to firm meant broker-dealers would constantly be updating these pages—incurring significant costs. Before any rule is implemented, FSI recommends FINRA conduct a cost-benefit analysis.

“The analysis should consider the costs firms and advisors incur with respect to the requirements, whether increases to BrokerCheck’s web traffic occurred, whether the increase was justified by the costs incurred by firms and advisors, and whether more cost-efficient alternatives exist for achieving the same goals,” Bellaire wrote.

Paul D. Mendelsohn, president of Vermont-based Windham Financial Services also voiced opposition to the rule, stressing in his comment letter the burdens the proposed rule would place on smaller firms.

“The more unnecessary rules you create, the less time brokers and their supervisors have to focus on the real compliance issues of providing the proper investment structure that meets their clients financial needs and objectives. Isn’t that really what our industry and compliance should be all about?” he wrote.

The comment period for FINRA’s proposed rule closes Monday, June 16, 2014.

Please or Register to post comments.

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