Better Background Checks for Advisors May Cost Investors
By: The AIMkts Editors
The Securities and Exchange Commission recently approved a FINRA rule requiring brokerage firms to put in writing their procedures for verifying the accuracy of a broker’s registration Form U4.
The requirement for written procedures will further on FINRA’s BrokerCheck database, a resource that allows investors to lookup information the financial advisors they’re interested in working with.
Click here for more on BrokerCheck and other FINRA forms, and what they mean.
Under the terms of the new rule, which goes into effect on July 1, brokerage firms will now be required to conduct a search of “reasonably available public records,” on all new hires and registrants. Information culled will include liens and business records, civil lawsuits, criminal history and any bankruptcy filings.
Should financial advisors be legally obligated to reveal their financial issues? Click here.
While it may sound like a good idea to just about every investor, advisors are cautious about effects the new rule will have on the bottom line. The cost to financial firms already can go as high as $5,000 per individual and with a greater amount of digging required, firms are wondering who will foot the bill. The client? Possibly.
Firms are now going to be working on what that will look like in dollars and sense. In the end, the hope is that investors will be more protected overall, but are they willing to pay for it? For more about issues related to financial advisors disclosing their own financial situations, click here.