Background Checks for Brokers Newest Requirement for FINRA-Member Firms

Attorney Advising Disclaimer

FINRA approved amendments to the broker regulator's supervision rule that expands the scope of background checks required for FINRA-member firm new-hires. Under the terms of the approved proposal, brokerages will be required to perform background checks on new employees and transfers alike. The reviews also will require firms to verify the accuracy and completeness of applicants' Form U4 submissions.

In an effort to further strengthen the veracity of the BrokerCheck database, FINRA will search public financial adviser databases and other investment and securities industry records and repositories for broker applicant information. Publicly available criminal records will also be included as part of the process.

FINRA is still mulling whether to include broker scores on securities exams as part of the BrokerCheck system, a proposal the Law Offices of Jonathan W. Evans & Associates supports. For instance, a recent Wall Street Journal study found that brokers who fail basic securities exams are associated with a greater incidence of BrokerCheck regulatory disclosures.

BrokerCheck already requires the inclusion of broker 10-year employment history, criminal records for all felonies and financial-related misdemeanors and disciplinary actions, complaints, and civil proceedings such as arbitration or mediation.

FINRA chairman and chief executive Richard G. Ketchum described the rules changes as "important initiatives to improve the accuracy and totality of details reported on a registered individual's Form U4."

The next step for the approved regulations is review by the Securities and Exchange Commission, who will then vote whether to approve the modification.

If you have invested with a broker or financial adviser and lack of information regarding the broker's financial and/or criminal history has led to a course of actions and decisions that have proven harmful to your investments and interests, please call The Law Offices of Jonathan W. Evans & Associates at (818)760-9880 for consultation and investigation.

News: Finra approves background checks for brokers (InvestmentNews)

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