FINRA to Require More Scrutiny of Brokers

Our personal stance on excessive regulations and how they stifle economic growth is no secret. Historically, the Financial Industry Regulatory Authority (FINRA) has been a shining example of an organization that is willing to overreach in an effort to regulate the investment business. However, FINRA has one complimentary service offered to the public free of charge that is soon to be much more accurate, and a great tool for the investing public.

On FINRA’s website, there is a complimentary service that can be used called BrokerCheck which allows investors to search individuals in the securities business or entire firms. The tool then discloses pertinent registration information, contact information and firm operations. Detailed reports (also free of charge) go even more in depth, covering any disclosure events, firm history, ownership, etc. Investors may also search individuals to see if there are any disclosure events on their personal records.

On Wednesday the Wall Street Journal reported that FINRA is setting a plan in motion requiring firms to research employees more strenuously, including formal background checks. FINRA also plans to cross-reference information reported to them with public court records to ensure that reports are accurate.

All of this stems from the Wall Street Journal uncovering 1,600 brokers with bankruptcy or criminal charges that went unreported on BrokerCheck. Now the regulatory body is taking the proper steps to ensure that BrokerCheck is an accurate and useful tool for the investing public.

In our opinion, BrokerCheck is a fantastic tool that we encourage every investor to utilize before doing business with a broker or advisor, and this tool helps to address concerns that investors may have about their financial professional.

If an investor has a preliminary appointment with a professional, we encourage that individual to do their research on BrokerCheck, the firm’s website, and the internet prior to that appointment. If a potential client notices a concerning disclosure event on BrokerCheck, do not hesitate to ask what the event was, why it happened and what they have done to resolve the matter. Unfortunately, not everyone in the financial world will be upfront and honest with you, and you must do your research.

In any industry, there are good regulations and bad regulations. A good regulation protects individuals and communities and punishes people who do wrong. A bad regulation is a rule that does nothing to solve a problem but puts an excessive burden (financial or otherwise) on a business. BrokerCheck reporting is a perfect example of a good regulation, one that we believe will make our industry more transparent and safer for investors.

Ben Treece is a partner with Treece Investment Advisory Corp ( and licensed with FINRA ( through Treece Financial Services Corp. The above information is the opinion of Ben Treece and should not be construed as investment advice or used without outside verification.
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