A feature story in this morning’s Wall Street Journal, “Keeping Bad Brokers from Fading into Background” tells the sad truth about what industry professionals already know: Information about bad brokers can disappear in as little as 2 years.
It’s ironic that a 17 year old having consensual sex with a 16 year old in some states will be labeled a sex offender and have to register as such for life; register and be stigmatized with such a label often associated with violent sexual predators and serial rapists. But steal or embezzle funds from an 82 year old woman or illegally “churn” or gamble away someone’s inheritance monies and your record could disappear in just 2 years. How is this possible?
FINRA (the Financial Industry Regulatory Authority) is the watchdog of stockbrokers. FINRA operates a free service for consumers, BrokerCheck (www.Finra.org/BrokerCheck), that allows consumers to see if their broker has faced discipline by FINRA or state authorities, filed bankruptcy, criminal charges and even complaints from other consumers. But BrokerCheck does not keep information if the broker leaves the industry for two or more years. Unfortunately, many bad brokers get forced out of the industry but simply come back to prey on the unsuspecting after their suspensions (or jail sentences) are over.
Since the financial meltdown of 2008, a wary public has used BrokerCheck over 14 million times this year. But the information they find can be very misleading if the broker voluntarily or involuntarily left the industry for a couple years. Worse, a “clean” record on Broker Check can lead to a false sense of security.
There is a push to allow FINRA to disclose past records. The Securities and Exchange Commission has the final say in the matter. Remember this is the same agency that failed to act on complaints years ago about Bernie Madoff.
Senior citizen and consumer advocates are deservedly livid about the failure of the government to provide accurate background information on brokers. We entrust these folks to invest and safeguard our accounts. And the government already requires that brokers undergo rigorous background checks. So why can’t this information be made public? Don’t consumers have a legitimate right to know everything about a broker to help them decide if they should invest? That is the question asked by Jason Zweig of the Wall Street Journal and thousands of others.
MahanyLaw protects the elderly and investors from all varieties of financial fraud. From whistleblower awards to stockbroker fraud to investment recovery, we can assist you or your loved anywhere. Call us today for a no obligation, no fee consultation.