SEC Panel Recommends Single Database to Run Background Checks

SEC Panel Recommends Single Database to Run Background Checks

magine being able to get information about any financial professional in the United States by visiting one web site.

Investor protection

To make it easier for investors to track securities violations by advisers and brokers, the Securities and Exchange Commission (SEC) Investor Advisory Committee (IAC) pitched the idea that the SEC work with other federal and state financial regulators to develop a single website to house disciplinary information about investment advisers, brokers and other financial professionals.

The committee also recommended that a single portal be provided for investors to access information in SEC and Financial Industry Regulatory Authority Inc. (FINRA) databases.

Anne Sheehan, director of corporate governance at the California State Teachers’ Retirement System and chairwoman of an IAC subcommittee, said that the proposal attempts to increase online information about financial advisers and make the data more accessible in order to better protect investors.

Financial adviser misconduct in one place

In endorsing the panel’s efforts, SEC member Kara Stein said all infractions by financial advisers should be made more easily accessible and located in one place.

Stein points out that a Google search for possible disciplinary actions involving investors is inadequate because a search would not take an investor to BrokerCheck, the database of registered brokers maintained by industry watchdog FINRA.

She also maintains that Google would fail to turn up the SEC’s Investment Adviser Public Disclosure database containing background information on registered investment advisers.

Furthermore, according to the IAC’s draft recommendations, a weakness of the SEC and FINRA sites is that they contain information only on people who are registered with the respective agencies.

The sites do not include unregistered firms or persons sanctioned by the SEC or state securities commissions, even those sanctioned for operating as an unregistered broker or adviser.

Easier background checks of investment professionals

Barbara Roper, IAC member and director of investor protection at the Consumer Federation of America, said that choosing an investment professional is the most important decision investors will make. So investors — especially the elderly — need to be able to conduct more robust background checks in order to weed out bad actors.

The proposal will be voted on at the SEC’s July meeting.

The team of investment fraud lawyers at Starr Austen & Miller LLP fights for the protection of investors and handles cases involving securities arbitration misrepresentation, overconcentration, broker fraud, negligence and breach of trust.

Source: Investment News