New Rules on Reporting Brokers’ Dismissals to Begin Dec. 12 

New rules significantly shorten the window of time brokerage firms have to report the details of a broker’s departure from their firm — an effort by securities regulators to make background information about brokers more accessible to consumers.

Starting on Dec.12, brokerage firms will have to report the details of a broker’s termination in three business days, down from 15. The Securities and Exchange Commission recently approved the change for the Financial Industry Regulatory Authority, the regulator of 629,530 registered securities representatives.

The information is reported to Finra’s BrokerCheck, a free online database intended for consumers to use to evaluate information about their brokers, or those they plan on using, including possible red flags such as frequent job-hopping. Finra has been trying to raise the profile of BrokerCheck in recent months, introducing a national print, online and television ad campaign this year.

Critics have said BrokerCheck has only limited usefulness, however. Information on the database includes a broker’s licenses, registrations, employment history and regulatory black marks. But it isn’t a customer review service, such as Yelp.com.

When a broker leaves a firm, the brokerage has to file a report called a U5 detailing the circumstances of the departure. If a broker was fired for a sales violation, that information would be reported to BrokerCheck. Not everything makes it onto BrokerCheck, however, such as internal employee reviews or problems not related to sales.

It is better than nothing, says William Jacobson, the director of the Securities Law Clinic at Cornell Law School. “It’s not the answer to all problems but at least it gives you some information,” he said. “Anything Finra can do to get more information into the public domain is a good thing.”

The 15-day delay in reporting the U5 information to BrokerCheck was designed to give brokers a chance to respond to any negative information on the report, Finra says. The regulator said the new three-day waiting period is “more reasonable.”

Source: TheNewYorkTimes – New Rules on Reporting Brokers’ Dismissals to Begin Dec. 12

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