AARP Urges SEC not to approve FINRA's proposed Limitations to the Broker Public Disclosure.

On August 7, 2009, pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 ("Act") and Rule 19b-4, the Financial Industry Regulatory Authority, Inc. ("FINRA") filed with the Securities and Exchange Commission ("SEC" or "Commission") a proposed rule change to FINRA Rule 8312 pertaining to FINRA BrokerCheck Disclosure.

However, the proposed Rule change would not expand access to other information that may be part of the CRD System regarding the former registered person, such as customer complaints, bankruptcies, liens, criminal events or arbitration claims.

FINRA states in purpose in keeping this information secret and not publicly available because it "believes this measured expansion of BrokerCheck strikes a balance between, on the one hand, investor protection interests, and on the other hand, personal privacy and fairness to former registered persons."

As the comment of one retired registered registered representative put it "Our privacy is not a concern to us and FINRA has no business falsely claiming to be protecting our privacy. The only privacy being protected is the privacy of people like Bernard Madoff or James Kelsoe." "Shame on FINRA's intent to shield the few."

Refreshingly on September 8, 2009, the Legislative Counsel and Legislative Policy Director of the AARP commented that:

While AARP commends FINRA’s proposed expansion of investors’ access to information about incidents involving registered representatives, AARP opposes that part of FINRA’s proposed rule change that would contract to two (2) years the period during which access may be had to data with respect to the records of former registered representatives. The Association believes that such a change would negatively impact investors by limiting the extent to which they could discover relevant data concerning financial advisory personnel who remain involved in the industry, yet who are not required to maintain registration.

As indicated by its comments stated above, AARP urges the Commission to reject that aspect of FINRA’s proposed change to Rule 8312 that would limit disclosure of data under the BrokerCheck facility.

On September 8, 2009, we also wrote:

the proposed rule change, as part of a comprehensive system of enforcement, and public transparency, should expand access to other information that may be part of the CRD system regarding the former registered person, such as customer complaints, bankruptcies, liens, criminal events or arbitration claims.

The public has a right to know with whom they are dealing, and unfortunately, once a broker is no longer registered for a period of two (2) years, no information is publicly available regarding that person, their prior associations, or regulatory actions against that person.

In fact, a review of existing data as reported to the CRD system indicates that 29,500 out of the 663,000 persons registered with NASD (approximately four percent of currently active registered persons) have been subject to one or more customer complaints and arbitrations within the last five years. Of this number, 2,751 persons (.41 percent of all registered persons) have had three or more complaints and arbitrations. Of the approximate 663,000 registered representatives in the country in 2003, only 2,751 or 0.41 % have been the subject of three or more complaints or arbitrations. See, e.g. NASD Notice to Members 03-49 (Sept. 2003).