By Peter Schroeder - 03/07/14 12:05 PM EST
A bipartisan pair of senators is calling on a financial regulator to tighten up its background checks of investment brokers.
Sens. Jack Reed (D-R.I.) and Chuck Grassley (R-Iowa) said the Financial Industry Regulatory Authority (FINRA) must improve the information it provides to investors, when it comes to problems in a broker’s past.
FINRA, which is a private self-regulatory organization and not a government agency, has said it would be looking into the reporting problems, and the senators made clear Friday they expect to see results.
“While FINRA has been responsive to our concerns regarding expungement of broker records, we remain concerned that crucial red flags and potential warning signs are not readily available to investors,” they said in a statement. “Clearly, there is some more work that FINRA needs to do. We expect FINRA to honor this commitment and ensure that the plain and simple facts are available to investors.”
FINRA’s handling of the database came into question by a study published by the Public Investors Arbitration Bar Association, a group for attorneys who represent investors in legal disputes with brokers.
The study found that, in addition to minor criminal charges, the database also sometimes missed cases where brokers were ever under internal review for fraud or violation of regulations, or whether they have previously failed industry qualification exams.
The attorney group determined such examples were being kept from the database by comparing what FINRA posted with broader reporters on brokers that are publicly available through some state securities regulators.