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Securities Compliance Sentinel Analysis of cutting-edge securities industry issues

FINRA May Publicly Share Disciplinary Complaints Against Brokers

Posted in Broker-Dealer Regulation, FINRA Enforcement

Much to the disappointment of brokers, the SEC recently approved a proposed rule that allows FINRA to publicly release copies of any disciplinary complaint or decision it issues, including the names of the parties involved.  Prior to approval of the rule, complaints appeared in summary format on FINRA’s BrokerCheck web portal.  Now, unredacted complaints will be available to the public.

In announcing the rule, the SEC stated that the rule promotes transparency and greater access to information.  However, as a person who represents brokers, I know that many complaints are meritless and frivolous.  Unfortunately, brokers will now have a black mark on their reputation based on complaints that contain unproven allegations which may be untrue.  Some observers have noted that around twenty percent of FINRA’s disciplinary complaints are dismissed or withdrawn.  Indeed, the most criticized aspect of the new rule is that those complaints will still be publicized by FINRA.   

For brokers that are especially concerned about adverse information on BrokerCheck, the new rule will be hard to swallow.