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SEC Restricts FINRA’s Creative License Re: Broker Records

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FINRA has had an awful lot dumped onto its plate in recent months. Since, as it turns out, its members aren’t the best at reporting little things like criminal convictions, personal bankruptcies, tax liens, etc., to the self-regulator, it’s had to order member firms to do some background checks themselves, rather than just take the word of the new guy who’s joining his 34th brokerage in eight years. Worse still, it’s had to tell those member firms to give it all of the information, which it had promised to go through with a fine toothed-comb and check against court records to minimize the number of paroled felons doling out financial advice under its august banner.

Well, if the highly-compensated folks at FINRA thought they might be able to deal with the ensuing backlog with their old delete-red-flags-from-BrokerCheck strategy, it is sorely mistaken.

The rule eliminates a common practice under Financial Industry Regulatory Authority's arbitration process in which clients who have filed damage claims against their brokers are asked—as a condition of settling the claim—not to oppose an expungement of the case from the broker's record….

Still, the regulator noted the number of general expungements remains high, and said it "encourages" Finra to conduct a review to determine whether further restrictions are needed. Both the SEC and Finra have said that expungement should be an extraordinary remedy.

SEC Tightens Rule on Cleansing Broker Records [WSJ]


FINRA Took Anthropology 101, Thinks There Might Be Something To It

The regulator is going to try and figure out "brokerage firm culture," and why said culture loves things like dwarf tossing, drug using, hooker hiring, etc.