A controversial NASD initiative that would give investors easy access to complaints against brokers is undergoing some change, but it’s looking increasingly likely to come to fruition.
In April of 2003, NASD laid the groundwork for the so-called BrokerCheck system. With a stated goal of giving investors more information about those who handle their investments, the NASD moved that all broker complaints become part of permanent, public records, with any additions to those record being made available via e-mail to investors who sign up for an alert system. (The initiative also favored making test scores, such as Series 7 grades, accessible to the public.)
After a period of minor reconfiguration, the initiative has survived more or less intact and will enter a comment period, which NASD is petitioning the SEC to extend through April 26. Congress, behind the sponsorship of Rick Renzi (R-AZ), already has passed a bill that would let NASD go forth with its initiative, clearing the way for quick enactment once the comment period concludes.
In a comment letter, NASAA has raised a few minor issues, but nothing that will substantively alter the initiative, says one broker privy to such information. “With NASAA just nitpicking at it and not raising any major issues, I’d say the coast is clear,” he adds. Many brokers fear the initiative, if passed, will give too much weight to false complaints against them, thereby encouraging abuse. Nonetheless, in the absence of any unforeseen complaints, the NASD is expected to push through the initiative after the comment period is over in April.