Count an SEC commissioner and the CEO of FINRA among those calling for a single public database for financial advisors’ and broker-dealers’ regulatory disclosures rather than the current patchwork.
In a panel at the North American Securities Administrators Association’s annual meeting, SEC Commissioner Allison Herren Lee and FINRA CEO Robert Cook said they would like to see more of a “one-stop shop” and consolidation among BrokerCheck, the Investment Adviser Public Disclosure website and other government and self-regulatory databases aimed at giving clients and prospects a place to review firms and financial professionals. They’re also eager to resume reforming the expungement process after FINRA withdrew
While wealth management professionals, researchers and journalists frequent BrokerCheck, the IAPD website, the SEC’s Investor.gov and other public databases, clients largely ignore them or don’t know they exist. But streamlining disclosures would present logistical difficulties, from working across jurisdictions to deciding how to present the information. Despite many changes over the years, a harmonized website to check on every kind of financial professional has remained as elusive as a single standard of care governing the conduct of brokers and advisors.
“These public-facing databases are extremely important,” said Herren Lee, a Democrat who served as acting chair between the departure of SEC Chairman Jay Clayton and the Senate confirmation of his replacement, Gary Gensler, this spring.
“I'd like to see greater consolidation of the information across various types of investment professionals,” she continued. “I know some of that has already taken place, and that I would like to see that continue to get us more to a place where we kind of have some kind of a one-stop shopping approach. When individuals are considering various forms of investment, they don't know, potentially, what their professional, you know, where they fall and which particular website to check. And so the more we can consolidate that information the better.”
At the end of the panel, Cook expressed support for the idea as well. Melanie Senter Lubin, NASAA’s president-elect and the Commissioner of the Maryland Division of Securities, asked each participant to name what rule change would be the most helpful for investors if they could make only one alteration to their respective rules.
“Mine is easy to explain quickly because Commissioner Lee already raised it, which is to have a one-stop shop for investors,” said Cook, naming a site called the
Neither provided details on which regulator might take the lead on the effort or whether a rule proposal would be required to set it in motion.
Expungement rules
After NASAA and the Public Investors Advocate Bar Association Foundation
Herren Lee praised FINRA’s statement calling for stricter rules governing expungement requests and a holistic review of the issue after tabling the proposal. After a different rule requiring minimum standard fees for a filing went into effect in September 2020, arbitration claims seeking solely expungement tumbled by 95% in the fourth quarter,
“We need to look closely at each individual case as to whether it's consistent with investor protection,” Herren Lee said. “It should be an extraordinary remedy, and it should be the result of notice to all the parties involved and the state securities regulators, so that there can be a fair and a balanced proceeding where all views are meaningfully represented — there's somebody arguing both sides of it — and decisions can be made by experienced participants.”
Of the proposed rule it withdrew, Cook noted that the regulator hadn’t intended for it to be a substitute for “a broader approach about really looking hard at what's the best way to do this.” The issue revolves around whether regulators are collecting and disclosing data and if arbitration or another method might be the best one to use, he said.
“We are planning to come forward with a discussion paper looking at expungement more generally to really provide some data and some background so that we can help inform the dialogue and then follow that up with stakeholder engagement sessions with NASAA and the states, with the SEC, with FINRA there and potentially other participants to really work through this in a holistic way,” Cook said. “We will look forward to continuing to work with you on that.”
With FINRA’s predecessor adopting its first rule relating to expungement in 2003, resolving the issue has spanned decades. In the virtual and in-person session, Senter Lubin drew laughter while promising to collaborate with fellow stakeholders on reforming expungements.
“So do we,” she said to Cook. “I really want to resolve this before I decide it's time to, you know, not work anymore.”
