Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend FINRA Rule 8312 (FINRA BrokerCheck Disclosure) To Allow the Dissemination of IAPD Information Through BrokerCheck, 26502-26506 [2020-09374]
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Federal Register / Vol. 85, No. 86 / Monday, May 4, 2020 / Notices
GRS–2017–0007–0008 (GRS 2.2, item
070).’’
10. Do agencies have to take any action
to implement these GRS changes?
Dated: April 28, 2020.
Sharon M. Lisa Grubb,
Executive Director and CEO.
[FR Doc. 2020–09364 Filed 5–1–20; 8:45 am]
BILLING CODE 8421–02–P
NARA regulations (36 CFR
1226.12(a)) require agencies to
disseminate GRS changes within six
months of receipt.
Per 36 CFR 1227.12(a)(1), you must
follow GRS dispositions that state they
must be followed without exception.
Per 36 CFR 1227.12(a)(3), if you have
an existing schedule that differs from a
new GRS item that does not require
being followed without exception, and
you wish to continue using your agencyspecific authority rather than the GRS
authority, you must notify NARA within
120 days of the date of this transmittal.
If you do not have an already existing
agency-specific authority but wish to
apply a retention period that differs
from that specified in the GRS, you
must submit a records schedule to
NARA for approval via the Electronic
Records Archives.
David S. Ferriero,
Archivist of the United States.
[FR Doc. 2020–09352 Filed 5–1–20; 8:45 am]
Sunshine Act Meeting; Correction
National Council on Disability.
Notice; correction.
The National Council on
Disability published a notice in the
Federal Register of April 27, 2020,
concerning a conference call meeting of
the Council. This document is intended
to correct the omission of noting the
conference call meeting as a Sunshine
Act meeting and to ensure that it is
properly categorized to be understood as
open to the public. All other
information from the original notice is
accurate.
SUMMARY:
CONTACT PERSON FOR MORE INFORMATION:
Anne Sommers, NCD, 1331 F Street
NW, Suite 850, Washington, DC 20004;
202–272–2004 (V), 202–272–2022 (Fax).
jbell on DSKJLSW7X2PROD with NOTICES
SUPPLEMENTARY INFORMATION:
Correction
In the Federal Register of April 27,
2020, FR Doc. 2020–08807, on page
23379, in the second column, correct
the subject heading to read:
Sunshine Act Meeting
VerDate Sep<11>2014
19:03 May 01, 2020
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Sunshine Act Meetings
Weeks of May 4, 11, 18,
25, June 1, 8, 2020.
PLACE: Commissioners’ Conference
Room, 11555 Rockville Pike, Rockville,
Maryland.
STATUS: Public.
TIME AND DATE:
Week of May 4, 2020
There are no meetings scheduled for
the week of May 4, 2020.
Week of May 11, 2020—Tentative
There are no meetings scheduled for
the week of May 11, 2020.
Week of May 18, 2020—Tentative
There are no meetings scheduled for
the week of May 18, 2020.
Week of June 1, 2020—Tentative
There are no meetings scheduled for
the week of June 1, 2020.
NATIONAL COUNCIL ON DISABILITY
ACTION:
[NRC–2020–0001]
Week of May 25, 2020—Tentative
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the week of May 25, 2020.
BILLING CODE 7515–01–P
AGENCY:
NUCLEAR REGULATORY
COMMISSION
Week of June 8, 2020—Tentative
There are no meetings scheduled for
the week of June 8, 2020.
CONTACT PERSON FOR MORE INFORMATION:
For more information or to verify the
status of meetings, contact Denise
McGovern at 301–415–0681 or via email
at Denise.McGovern@nrc.gov. The
schedule for Commission meetings is
subject to change on short notice.
The NRC Commission Meeting
Schedule can be found on the internet
at: https://www.nrc.gov/public-involve/
public-meetings/schedule.html.
The NRC provides reasonable
accommodation to individuals with
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need a reasonable accommodation to
participate in these public meetings or
need this meeting notice or the
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public meetings in another format (e.g.,
braille, large print), please notify Anne
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at 301–287–0745, by videophone at
240–428–3217, or by email at
Anne.Silk@nrc.gov. Determinations on
requests for reasonable accommodation
will be made on a case-by-case basis.
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Members of the public may request to
receive this information electronically.
If you would like to be added to the
distribution, please contact the Nuclear
Regulatory Commission, Office of the
Secretary, Washington, DC 20555 (301–
415–1969), or by email at
Wendy.Moore@nrc.gov or Tyesha.Bush@
nrc.gov.
The NRC is holding the meetings
under the authority of the Government
in the Sunshine Act, 5 U.S.C. 552b.
Dated: April 30, 2020.
For the Nuclear Regulatory Commission.
Denise L. McGovern,
Policy Coordinator,Office of the Secretary.
[FR Doc. 2020–09614 Filed 4–30–20; 4:15 pm]
BILLING CODE 7590–01–P
SECURITIES AND EXCHANGE
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[Release No. 34–88760; File No. SR–FINRA–
2020–012]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend FINRA Rule
8312 (FINRA BrokerCheck Disclosure)
To Allow the Dissemination of IAPD
Information Through BrokerCheck
April 28, 2020.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on April 22,
2020, Financial Industry Regulatory
Authority, Inc. (‘‘FINRA’’) filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘Commission’’) the proposed
rule change as described in Items I, II,
and III below, which Items have been
prepared by FINRA. FINRA has
designated the proposed rule change as
constituting a ‘‘non-controversial’’ rule
change under paragraph (f)(6) of Rule
19b–4 under the Act,3 which renders
the proposal effective upon receipt of
this filing by the Commission. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 17 CFR 240.19b–4(f)(6). Rule 19b–4(f)(6)
requires a self-regulatory organization to give the
Commission written notice of its intent to file the
proposed rule change at least five business days
prior to the date of filing of the proposed rule
change, or such shorter time as designated by the
Commission. FINRA has satisfied this requirement.
2 17
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Federal Register / Vol. 85, No. 86 / Monday, May 4, 2020 / Notices
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
FINRA is proposing to amend FINRA
Rule 8312 (FINRA BrokerCheck
Disclosure) to allow the dissemination
through BrokerCheck® of information
already publicly disseminated through
the SEC’s Investment Adviser Public
Disclosure (‘‘IAPD’’) database about
registered brokers who are, or were,
licensed as investment adviser
representatives. The proposed rule
change also would make nonsubstantive, technical changes to FINRA
Rule 8312.4
The text of the proposed rule change
is available on FINRA’s website at
https://www.finra.org, at the principal
office of FINRA and at the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission,
FINRA included statements concerning
the purpose of and basis for the
proposed rule change and discussed any
comments it received on the proposed
rule change. The text of these statements
may be examined at the places specified
in Item IV below. FINRA has prepared
summaries, set forth in sections A, B,
and C below, of the most significant
aspects of such statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
jbell on DSKJLSW7X2PROD with NOTICES
(a) BrokerCheck Program
FINRA established the BrokerCheck
program (then known as the Public
Disclosure Program) in 1988 to provide
investors and the general public with
information on the professional
background, business practices, and
conduct of member firms and their
associated persons. Since establishing
BrokerCheck, FINRA has regularly
assessed the scope and utility of the
information it provides to the public
and, as a result, has made numerous
changes to improve the program. These
changes have made BrokerCheck easier
to access by expanding the available
methods of requesting information
4 Specifically, the proposed rule change would
define in FINRA Rule 8312(a)(2) ‘‘a current or
former associated person of a BrokerCheck Firm’’ as
a ‘‘BrokerCheck Associated Person.’’ In addition,
the proposed rule change would require the
renumbering of current paragraph (d) as new
paragraph (g) of FINRA Rule 8312, and the updating
of cross references.
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through the program. For instance,
initially the public could request
information only via U.S. mail or
facsimile. FINRA subsequently added
the ability to submit requests via a tollfree telephone number in 1991 and then
through email in 1997.5 Now
BrokerCheck reports are available
instantly online at https://
brokercheck.finra.org.6 FINRA also has
increased the amount of information
available through the program. At first,
limited employment history, final
disciplinary actions and criminal
convictions were available through
BrokerCheck. The information currently
available to investors through
BrokerCheck includes registrations
brokers hold and the examinations they
have passed, and disclosure information
regarding various criminal, regulatory,
customer dispute, termination and
financial matters on current and former
FINRA-registered brokerage firms and
brokers.
The information displayed through
BrokerCheck is derived from the Central
Registration Depository (‘‘CRD®’’).7 The
CRD system is the central licensing and
registration system used by the U.S.
securities industry and its regulators. In
general, information in the CRD system
is obtained through the uniform
registration forms that firms and
regulatory authorities complete as part
of the securities industry registration
and licensing process.8 These forms,
particularly Forms U4 and U5, collect
5 Congress in 1990 amended Exchange Act
Section 15A to require FINRA to establish and
maintain a toll-free telephone listing to receive
inquiries regarding disciplinary actions involving
its member firms and their associated persons, and
promptly respond to such inquiries in writing. See
Securities Enforcement Remedies and Penny Stock
Reform Act of 1990, Public Law 101–429, 104 Stat.
931 (1990). See also Notice to Members 00–16
(March 2000).
6 In 2006 Congress again amended Exchange Act
Section 15A to, among other things, expand the
methods by which BrokerCheck information is
made available. See Military Personnel Financial
Services Protection Act, Public Law 109–290, 120
Stat. 1317 (2006).
7 The concept for the CRD system was developed
by FINRA jointly with the North American
Securities Administrators Association (‘‘NASAA’’),
and NASAA and state regulators play a critical role
in its ongoing development and implementation.
FINRA operates the CRD system pursuant to
policies developed jointly with NASAA. FINRA
works with the SEC, NASAA and other members of
the regulatory community to ensure that
information submitted and maintained in the CRD
system is accurate and complete.
8 The uniform registration forms are Form BD
(Uniform Application for Broker-Dealer
Registration), Form BDW (Uniform Request for
Broker-Dealer Withdrawal), Form BR (Uniform
Branch Office Registration Form), Form U4
(Uniform Application for Securities Industry
Registration or Transfer), Form U5 (Uniform
Termination Notice for Securities Industry
Registration), and Form U6 (Uniform Disciplinary
Action Reporting Form).
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administrative, regulatory, criminal
history, customer complaint and other
information about brokers.9 FINRA,
state and other regulatory authorities
use this information in connection with
their licensing and regulatory activities,
and member firms use this information
to help them make informed
employment decisions. As of March 31,
2020, FINRA had processed over 56
million registration approvals for
brokers and investment adviser
representatives in the CRD system over
a period spanning more than 20 years.
Pursuant to rules approved by the
SEC, FINRA makes specified
information in the CRD system publicly
available through BrokerCheck.10
BrokerCheck is part of FINRA’s ongoing
effort to help investors make informed
choices about the brokers and brokerdealer firms with which they may
conduct business. BrokerCheck
maintains information on the
approximately 3,610 registered brokerdealer firms and 625,000 registered
brokers. BrokerCheck also provides the
public with access to information about
formerly registered broker-dealer firms
and brokers.11 In 2019 alone,
BrokerCheck helped users conduct
almost 41 million searches of firms and
brokers.
(b) IAPD Database
IAPD provides information about both
SEC-registered and state-registered
investment adviser firms, certain
investment adviser firms that are
exempt from registration with the SEC
or states, and state-registered investment
adviser representatives. The information
in IAPD is derived from the Investment
Adviser Registration Depository
(‘‘IARD’’), an electronic filing system
sponsored by the SEC and NASAA that
collects and maintains the registration,
reporting and disclosure information for
9 FINRA and NASAA jointly drafted the Forms
U4 and U5, and both organizations collaborate in
the development of any proposed amendments to
these Forms.
10 There is a limited amount of information in the
CRD system that FINRA does not display through
BrokerCheck, including personal or confidential
information. A detailed description of the
information made available through BrokerCheck is
available at https://www.finra.org/investors/learnto-invest/choosing-investment-professional/aboutbrokercheck.
11 Formerly registered brokers, although no longer
in the securities industry in a registered capacity,
may work in other investment-related industries or
may seek to attain other positions of trust with
potential investors. BrokerCheck provides
information on more than 16,900 formerly
registered broker-dealer firms and 564,000 formerly
registered brokers. Broker records are available
through BrokerCheck for 10 years after a broker
leaves the industry, and records of brokers who are
the subject of disciplinary actions and certain other
events remain on BrokerCheck permanently.
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Federal Register / Vol. 85, No. 86 / Monday, May 4, 2020 / Notices
investment advisers and related
persons.
BrokerCheck and IAPD have many
similarities. For example, both systems
display information about individuals
that has been filed with the CRD system
on Forms U4, U5 and U6.12 In addition,
information on many registered
individuals can be obtained in either
system because the majority of brokers
are also registered as investment adviser
representatives and vice versa.13 Despite
the similarities, there are some
differences between BrokerCheck and
IAPD, including the information
available, the presentation format, and
the manner in which users may obtain
information from the systems. For
instance, the systems display different
information pertaining to professional
designations, passed qualification
examinations, and registrations. The
systems differ also in the manner in
which detailed information about firms
is made available to users. BrokerCheck
displays a report that is developed from
the information reported on Forms BD
and BDW whereas IAPD provides links
to the most recently filed Form ADV,
Uniform Application for Investment
Adviser Registration and Report by
Exempt Reporting Advisers, and the
Form ADV Part 2 Brochures in a
Portable Document Format (‘‘PDF’’).
jbell on DSKJLSW7X2PROD with NOTICES
(c) Display of Additional Investment
Adviser Representative Information
The SEC’s Investor Advisory
Committee (‘‘IAC’’) recommended the
development of more complete, simple
and centrally operated search functions
that permit thorough understanding of
the background of those offering
financial products and financial
advice.14 Shortly after the IAC’s
recommendations were issued, FINRA
and SEC staff began discussing how best
to align changes to IAPD under
consideration by the SEC with possible
changes to BrokerCheck to provide users
with more comprehensive, consistent,
and easier access to information already
12 With respect to investment adviser
representatives, IARD provides for the filing of
these Forms through the CRD system.
13 To help investors access information on the
minority of individuals who are not dually
registered, FINRA in 2012 unified the search
returns for the IAPD and BrokerCheck databases.
This change resulted from a study released by SEC
staff in January 2011 that included
recommendations on improving investor access to
investment adviser and broker-dealer registration
information. The study was required by Section
919B of the Dodd-Frank Wall Street Reform and
Consumer Protection Act, Public Law 111–203, 124
Stat. 1376 (2010).
14 The IAC’s recommendations are available at
https://www.sec.gov/spotlight/investor-advisorycommittee-2012/final_iac_backgroundcheck_
recommendation_071615.pdf.
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19:03 May 01, 2020
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publicly disseminated about individuals
that is contained in both systems. On
February 15, 2020, the SEC
implemented changes to IAPD to
display information that is already
publicly disseminated through
BrokerCheck.15 As such, FINRA is
proposing to amend Rule 8312 to make
corresponding changes to allow the
dissemination through BrokerCheck of
information already publicly
disseminated through IAPD about
registered brokers who are, or were,
licensed as investment adviser
representatives. This change would
allow users of BrokerCheck to obtain the
available information about these
individuals in a single search of
BrokerCheck or IAPD and thereby
minimize the need to access multiple
databases.16
(d) Proposed Amendments
As previously discussed, information
about brokers and investment adviser
representatives is filed with the CRD
system through certain registration
forms. Some of the information reported
for an investment adviser representative
is displayed in BrokerCheck if such an
individual also has, at some point, been
registered as a broker. Specifically, the
following information reported by an
investment adviser representative (if
displayed in IAPD) is made available
through BrokerCheck:
• Current investment adviser firm
(applies only to a currently registered
investment adviser representative);
• identifying information (name
changes, other names);
• employment history for the past 10
years;
• state qualification exams passed;
• other business activities; and
• disclosure events (excluding
historic disclosure events).17
FINRA proposes to add new
paragraph (d) to FINRA Rule 8312 to
provide that FINRA may release through
BrokerCheck information already
publicly disseminated through IAPD
about a BrokerCheck Associated Person
currently associated with a BrokerCheck
Firm who is, or was, licensed as an
15 This information includes self-regulatory
organization and state broker licenses, and broker
qualification exams passed.
16 FINRA notes that the proposed rule change
would impact members that have elected to be
treated as capital acquisition brokers (‘‘CABs’’),
given that the CAB rule set incorporates the
impacted FINRA rule by reference.
17 Historic disclosure events (i.e., certain
disclosure events involving customer dispute
information reported in the CRD system that
became no longer reportable after an individual’s
first investment adviser representative registration
was approved but before the individual’s first
broker registration was approved) currently are not
included in BrokerCheck.
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investment adviser representative.18
Accordingly, under the proposed rule
change, the following additional
information would be displayed through
BrokerCheck for those individuals who
are currently dually registered as a
broker and an investment adviser
representative:
• State investment adviser
representative licenses;
• current and past investment adviser
firms, registered branches, and nonregistered locations that are not private
residences where the individual is or
was registered;
• historic disclosure events; and
• professional designations.19
In addition, for those individuals who
are currently registered as brokers and
were previously registered as
investment adviser representatives,
BrokerCheck would display all of the
publicly disseminated additional
investment adviser representative
information listed above, except for
professional designations because a
previously reported professional
designation may no longer be in effect.
However, if a registered broker currently
holds a professional designation, this
information would be displayed through
BrokerCheck if reported by the broker
via Form U4.
For any individual who currently is
not registered as a broker, such as a
currently registered investment adviser
representative who was formerly
registered as a broker, the additional
investment adviser representative
information referenced above would not
be displayed through BrokerCheck. As it
does today, BrokerCheck would
continue to include a link to IAPD for
those individuals who are or were
previously registered in an investment
adviser representative capacity so that
investors could obtain further
information about such individuals in
that system.20 Furthermore, FINRA
18 A ‘‘BrokerCheck Firm’’ is a current or former
FINRA member or a current or former member of
a registered national securities exchange that uses
CRD for registration purposes. See FINRA Rule
8312(a)(1). See also supra note 4.
19 Should the SEC in the future make additional
categories of information about investment adviser
representatives publicly available in IAPD, FINRA
will consult with the SEC regarding the
dissemination of the additional information through
BrokerCheck. The dissemination through
BrokerCheck of the additional information may
apply to those individuals who are currently dually
registered as a broker and an investment adviser
representative, as well as those individuals who are
currently registered as a broker and were previously
registered as an investment adviser representative.
20 Similarly, with respect to firms, BrokerCheck
will continue to include a link to the summary page
of IAPD for a broker-dealer that also is registered
as an investment adviser. From the IAPD summary
page, users can easily view a PDF version of the
most recently filed Form ADV for that firm. In
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plans to add a notation in BrokerCheck
for formerly registered brokers who
currently are registered as investment
adviser representatives indicating that
more current information regarding the
investment professional is available in
IAPD.
FINRA has filed the proposed rule
change for immediate effectiveness.
FINRA anticipates that the
implementation date of the proposed
rule change will be June 20, 2020.
Economic Impact Assessment
2. Statutory Basis
Regulatory Need
FINRA believes that the proposed rule
change is consistent with the provisions
of Section 15A(b)(6) of the Act,21 which
requires, among other things, that
FINRA rules must be designed to
prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, and, in
general, to protect investors and the
public interest.
Following ongoing discussions with
SEC staff, FINRA is proposing to amend
Rule 8312 to allow the dissemination
through BrokerCheck of information
already publicly disseminated through
IAPD about registered brokers who are,
or were, licensed as investment adviser
representatives. The proposed rule
change will align BrokerCheck with the
changes the SEC implemented to IAPD
on February 15, 2020, and will allow
investors and other users of
BrokerCheck to obtain the available
information that already is publicly
disseminated about these individuals in
a single search of BrokerCheck or IAPD
and thereby minimize the need to access
multiple systems. FINRA believes that
the proposed rule change will provide
investors and other users of
BrokerCheck with more consistent and
easier access to information about the
investment professionals with which
they may conduct business because it
will result in BrokerCheck displaying
the same level of information that
currently is available in IAPD.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
jbell on DSKJLSW7X2PROD with NOTICES
FINRA does not believe that the
proposed rule change will result in any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
addition, Form CRS will be accessible through
BrokerCheck and IAPD upon its implementation in
2020. See Form CRS Relationship Summary;
Amendments to Form ADV, Securities Exchange
Act Release No. 86032 (June 5, 2019), 84 FR 33492
(July 12, 2019).
21 15 U.S.C. 78o–3(b)(6).
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FINRA has undertaken an economic
impact assessment, as set forth below, to
further analyze the regulatory need for
the proposed rule change, its potential
economic impacts, including
anticipated costs, benefits, and
distributional and competitive effects,
relative to the current baseline, and the
alternatives FINRA considered in
assessing how best to meet its regulatory
objective.
BrokerCheck provides the public with
information on the professional
background, business practices, and
conduct of FINRA member firms and
their associated persons. FINRA
believes, however, that changes to the
information presented in BrokerCheck
can make BrokerCheck more useful for
investors and other users of the system.
Accordingly, FINRA is proposing to add
to BrokerCheck investment adviser
representative information for those
individuals who are currently registered
as brokers, and who are currently or
were previously registered as
investment adviser representatives.
Economic Baseline
The economic baseline for the rule
change is the current rule that addresses
the types of information displayed in
BrokerCheck. The proposal is expected
to affect users of BrokerCheck, and
currently and formerly registered firms
and individuals. Users of BrokerCheck
include investors, member firms and
other entities in the financial services
industry, and individuals registered as
brokers or seeking employment in the
brokerage industry.
The information displayed in
BrokerCheck is derived from the CRD
system. In general, the information
enables users to make informed
decisions regarding the firms currently
registered as broker-dealers and the
individuals currently registered as
brokers. Decisions include the choice of
firms or individuals to do business with
or employ, and the choice of firms with
which to seek employment.
The ability of users to access and
review information related to individual
brokers through BrokerCheck is
constrained by certain limitations. One
of these limitations is that BrokerCheck
currently provides indirect access to
information describing the investment
advisory business of a broker, requiring
users to access a separate system (IAPD)
to gather additional information that
could be relevant to their decision. The
need to access a separate system
increases users’ search costs and
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26505
reduces their ability to research and
compare information about individuals
in the brokerage industry.
Economic Impacts
The proposed rule change would
increase the amount of investment
adviser information available or
accessible through BrokerCheck, but
would not change the aggregate
information available to users of
BrokerCheck and IAPD. Users of
BrokerCheck would no longer need to
access a separate system—IAPD—to
obtain the information for individuals
currently registered as brokers who are,
or were, licensed as investment adviser
representatives.22 The ability to review
this information in a more efficient
manner would reduce user search costs,
particularly for users that seek
individuals who are experienced in or
can offer both brokerage and advisory
services. These users would also benefit
by doing business with or employing
individuals or firms with individuals
that are experienced in or can offer
services more closely aligned with their
needs, thereby increasing their
economic welfare.
Information that may become
available or more accessible through
BrokerCheck includes information
relating to historic disclosure events of
investment adviser representatives.
Disclosure events reported to the CRD
system, which include customer
complaints, have been found to be
predictive of future misconduct.23 The
review and consideration of this
additional information before the
selection of an individual with whom to
do business or to employ may improve
investor protections by increasing the
ability of users to understand the
potential risk of misconduct. It is
anticipated, however, that there will not
be a significant number of Historic
Disclosure events to be displayed
22 BrokerCheck maintains information on 3,610
firms currently registered as broker-dealers and
625,000 individuals currently registered as brokers.
Among the firms currently registered as brokerdealers, 526 (15 percent) are currently registered as
investment advisers and 130 (four percent) were
formerly registered as investment advisers.
Similarly, among the individuals currently
registered as brokers, 295,120 (47 percent) are
currently registered as investment adviser
representatives, and 16,458 (three percent) were
formerly registered as investment adviser
representatives.
23 See Hammad Qureshi & Jonathan Sokobin, Do
Investors Have Valuable Information About
Brokers? (2015), https://www.finra.org/sites/default/
files/OCE-Working-Paper.pdf. See also Mark Egan,
Gregor Matvos & Amit Seru, The Market for
Financial Adviser Misconduct, 127(1) Journal of
Political Economy 233–295 (2019); and Stephen G.
Dimmock, & William C. Gerken, Predicting Fraud
by Investment Managers, 105(1) Journal of Financial
Economics 153–173 (2012).
E:\FR\FM\04MYN1.SGM
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Federal Register / Vol. 85, No. 86 / Monday, May 4, 2020 / Notices
through BrokerCheck. The economic
impact of this aspect of the proposed
rule change, therefore, is expected to be
limited.
The proposed rule change is not
expected to harm or hinder competition
among individuals currently registered
as brokers who were previously
registered as investment adviser
representatives. Under the proposed
rule change, similar past employment
information as an investment adviser
representative would be displayed
through BrokerCheck regardless of
whether that previous employment was
at (1) a firm dually registered as a
broker-dealer and an investment
adviser, or (2) a firm solely registered as
an investment adviser. Information is
also currently available through IAPD
describing the investment adviser firms
at which the individuals were
previously employed.
Alternatives Considered
No alternatives were considered for
this proposed rule change.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Written comments were neither
solicited nor received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
jbell on DSKJLSW7X2PROD with NOTICES
Because the foregoing proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act 24 and Rule 19b–
4(f)(6) thereunder.25
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
FINRA–2020–012 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–FINRA–2020–012. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of 10
a.m. and 3 p.m. Copies of such filing
also will be available for inspection and
copying at the principal office of
FINRA. All comments received will be
posted without change. Persons
submitting comments are cautioned that
we do not redact or edit personal
identifying information from comment
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–FINRA–
2020–012 and should be submitted on
or before May 26, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.26
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–09374 Filed 5–1–20; 8:45 am]
BILLING CODE 8011–01–P
24 15
U.S.C. 78s(b)(3)(A).
25 17 CFR 240.19b–4(f)(6).
VerDate Sep<11>2014
19:03 May 01, 2020
26 17
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CFR 200.30–3(a)(12).
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SECURITIES AND EXCHANGE
COMMISSION
Sunshine Act Meetings
Notice is hereby given,
pursuant to the provisions of the
Government in the Sunshine Act, Public
Law 94–409, the Securities and
Exchange Commission will hold an
Open Meeting on Wednesday, May 6,
2020 at 1:00 p.m.
PLACE: The meeting will be held via
remote means and/or at the
Commission’s headquarters, 100 F
Street NE, Washington, DC 20549.
STATUS: This meeting will begin at 1:00
p.m. (ET) and will be open to the public
via audio webcast only on the
Commission’s website at www.sec.gov.
MATTER TO BE CONSIDERED: Whether to
adopt a final order, following the
issuance of a proposed order on January
8, 2020 for public comment, that would
require the national securities
exchanges for equities and FINRA to
propose a single, new national market
system (NMS) plan to increase
transparency and address inefficiencies,
conflicts of interest and other issues
presented by the current governance
structure of the three NMS plans that
govern the public dissemination of realtime, consolidated equity market data
for NMS stocks.
CONTACT PERSON FOR MORE INFORMATION:
For further information and to ascertain
what, if any, matters have been added,
deleted or postponed, please contact
Vanessa A. Countryman, Office of the
Secretary, at (202) 551–5400.
TIME AND DATE:
Dated: April 29, 2020.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2020–09560 Filed 4–30–20; 11:15 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Sunshine Act Meetings
FEDERAL REGISTER CITATION OF PREVIOUS
ANNOUNCEMENT: To Be Published.
PREVIOUSLY ANNOUNCED TIME AND DATE OF
THE MEETING: Wednesday, May 6, 2020
at 1:00 p.m.
The Closed
Meeting scheduled for Wednesday, May
6, 2020 at 1:00 p.m. has been changed
to Wednesday, May 6, 2020 at 10:00
a.m.
CONTACT PERSON FOR MORE INFORMATION:
For further information and to ascertain
what, if any, matters have been added,
deleted or postponed, please contact the
CHANGES IN THE MEETING:
E:\FR\FM\04MYN1.SGM
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]]>Agencies
[Federal Register Volume 85, Number 86 (Monday, May 4, 2020)]
[Notices]
[Pages 26502-26506]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-09374]
=======================================================================
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-88760; File No. SR-FINRA-2020-012]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Amend FINRA Rule 8312 (FINRA BrokerCheck
Disclosure) To Allow the Dissemination of IAPD Information Through
BrokerCheck
April 28, 2020.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on April 22, 2020, Financial Industry Regulatory Authority, Inc.
(``FINRA'') filed with the Securities and Exchange Commission (``SEC''
or ``Commission'') the proposed rule change as described in Items I,
II, and III below, which Items have been prepared by FINRA. FINRA has
designated the proposed rule change as constituting a ``non-
controversial'' rule change under paragraph (f)(6) of Rule 19b-4 under
the Act,\3\ which renders the proposal effective upon receipt of this
filing by the Commission. The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 17 CFR 240.19b-4(f)(6). Rule 19b-4(f)(6) requires a self-
regulatory organization to give the Commission written notice of its
intent to file the proposed rule change at least five business days
prior to the date of filing of the proposed rule change, or such
shorter time as designated by the Commission. FINRA has satisfied
this requirement.
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[[Page 26503]]
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
FINRA is proposing to amend FINRA Rule 8312 (FINRA BrokerCheck
Disclosure) to allow the dissemination through BrokerCheck[supreg] of
information already publicly disseminated through the SEC's Investment
Adviser Public Disclosure (``IAPD'') database about registered brokers
who are, or were, licensed as investment adviser representatives. The
proposed rule change also would make non-substantive, technical changes
to FINRA Rule 8312.\4\
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\4\ Specifically, the proposed rule change would define in FINRA
Rule 8312(a)(2) ``a current or former associated person of a
BrokerCheck Firm'' as a ``BrokerCheck Associated Person.'' In
addition, the proposed rule change would require the renumbering of
current paragraph (d) as new paragraph (g) of FINRA Rule 8312, and
the updating of cross references.
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The text of the proposed rule change is available on FINRA's
website at https://www.finra.org, at the principal office of FINRA and
at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, FINRA included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. FINRA has prepared summaries, set forth in sections A,
B, and C below, of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
(a) BrokerCheck Program
FINRA established the BrokerCheck program (then known as the Public
Disclosure Program) in 1988 to provide investors and the general public
with information on the professional background, business practices,
and conduct of member firms and their associated persons. Since
establishing BrokerCheck, FINRA has regularly assessed the scope and
utility of the information it provides to the public and, as a result,
has made numerous changes to improve the program. These changes have
made BrokerCheck easier to access by expanding the available methods of
requesting information through the program. For instance, initially the
public could request information only via U.S. mail or facsimile. FINRA
subsequently added the ability to submit requests via a toll-free
telephone number in 1991 and then through email in 1997.\5\ Now
BrokerCheck reports are available instantly online at https://brokercheck.finra.org.\6\ FINRA also has increased the amount of
information available through the program. At first, limited employment
history, final disciplinary actions and criminal convictions were
available through BrokerCheck. The information currently available to
investors through BrokerCheck includes registrations brokers hold and
the examinations they have passed, and disclosure information regarding
various criminal, regulatory, customer dispute, termination and
financial matters on current and former FINRA-registered brokerage
firms and brokers.
---------------------------------------------------------------------------
\5\ Congress in 1990 amended Exchange Act Section 15A to require
FINRA to establish and maintain a toll-free telephone listing to
receive inquiries regarding disciplinary actions involving its
member firms and their associated persons, and promptly respond to
such inquiries in writing. See Securities Enforcement Remedies and
Penny Stock Reform Act of 1990, Public Law 101-429, 104 Stat. 931
(1990). See also Notice to Members 00-16 (March 2000).
\6\ In 2006 Congress again amended Exchange Act Section 15A to,
among other things, expand the methods by which BrokerCheck
information is made available. See Military Personnel Financial
Services Protection Act, Public Law 109-290, 120 Stat. 1317 (2006).
---------------------------------------------------------------------------
The information displayed through BrokerCheck is derived from the
Central Registration Depository (``CRD[supreg]'').\7\ The CRD system is
the central licensing and registration system used by the U.S.
securities industry and its regulators. In general, information in the
CRD system is obtained through the uniform registration forms that
firms and regulatory authorities complete as part of the securities
industry registration and licensing process.\8\ These forms,
particularly Forms U4 and U5, collect administrative, regulatory,
criminal history, customer complaint and other information about
brokers.\9\ FINRA, state and other regulatory authorities use this
information in connection with their licensing and regulatory
activities, and member firms use this information to help them make
informed employment decisions. As of March 31, 2020, FINRA had
processed over 56 million registration approvals for brokers and
investment adviser representatives in the CRD system over a period
spanning more than 20 years.
---------------------------------------------------------------------------
\7\ The concept for the CRD system was developed by FINRA
jointly with the North American Securities Administrators
Association (``NASAA''), and NASAA and state regulators play a
critical role in its ongoing development and implementation. FINRA
operates the CRD system pursuant to policies developed jointly with
NASAA. FINRA works with the SEC, NASAA and other members of the
regulatory community to ensure that information submitted and
maintained in the CRD system is accurate and complete.
\8\ The uniform registration forms are Form BD (Uniform
Application for Broker-Dealer Registration), Form BDW (Uniform
Request for Broker-Dealer Withdrawal), Form BR (Uniform Branch
Office Registration Form), Form U4 (Uniform Application for
Securities Industry Registration or Transfer), Form U5 (Uniform
Termination Notice for Securities Industry Registration), and Form
U6 (Uniform Disciplinary Action Reporting Form).
\9\ FINRA and NASAA jointly drafted the Forms U4 and U5, and
both organizations collaborate in the development of any proposed
amendments to these Forms.
---------------------------------------------------------------------------
Pursuant to rules approved by the SEC, FINRA makes specified
information in the CRD system publicly available through
BrokerCheck.\10\ BrokerCheck is part of FINRA's ongoing effort to help
investors make informed choices about the brokers and broker-dealer
firms with which they may conduct business. BrokerCheck maintains
information on the approximately 3,610 registered broker-dealer firms
and 625,000 registered brokers. BrokerCheck also provides the public
with access to information about formerly registered broker-dealer
firms and brokers.\11\ In 2019 alone, BrokerCheck helped users conduct
almost 41 million searches of firms and brokers.
---------------------------------------------------------------------------
\10\ There is a limited amount of information in the CRD system
that FINRA does not display through BrokerCheck, including personal
or confidential information. A detailed description of the
information made available through BrokerCheck is available at
https://www.finra.org/investors/learn-to-invest/choosing-investment-professional/about-brokercheck.
\11\ Formerly registered brokers, although no longer in the
securities industry in a registered capacity, may work in other
investment-related industries or may seek to attain other positions
of trust with potential investors. BrokerCheck provides information
on more than 16,900 formerly registered broker-dealer firms and
564,000 formerly registered brokers. Broker records are available
through BrokerCheck for 10 years after a broker leaves the industry,
and records of brokers who are the subject of disciplinary actions
and certain other events remain on BrokerCheck permanently.
---------------------------------------------------------------------------
(b) IAPD Database
IAPD provides information about both SEC-registered and state-
registered investment adviser firms, certain investment adviser firms
that are exempt from registration with the SEC or states, and state-
registered investment adviser representatives. The information in IAPD
is derived from the Investment Adviser Registration Depository
(``IARD''), an electronic filing system sponsored by the SEC and NASAA
that collects and maintains the registration, reporting and disclosure
information for
[[Page 26504]]
investment advisers and related persons.
BrokerCheck and IAPD have many similarities. For example, both
systems display information about individuals that has been filed with
the CRD system on Forms U4, U5 and U6.\12\ In addition, information on
many registered individuals can be obtained in either system because
the majority of brokers are also registered as investment adviser
representatives and vice versa.\13\ Despite the similarities, there are
some differences between BrokerCheck and IAPD, including the
information available, the presentation format, and the manner in which
users may obtain information from the systems. For instance, the
systems display different information pertaining to professional
designations, passed qualification examinations, and registrations. The
systems differ also in the manner in which detailed information about
firms is made available to users. BrokerCheck displays a report that is
developed from the information reported on Forms BD and BDW whereas
IAPD provides links to the most recently filed Form ADV, Uniform
Application for Investment Adviser Registration and Report by Exempt
Reporting Advisers, and the Form ADV Part 2 Brochures in a Portable
Document Format (``PDF'').
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\12\ With respect to investment adviser representatives, IARD
provides for the filing of these Forms through the CRD system.
\13\ To help investors access information on the minority of
individuals who are not dually registered, FINRA in 2012 unified the
search returns for the IAPD and BrokerCheck databases. This change
resulted from a study released by SEC staff in January 2011 that
included recommendations on improving investor access to investment
adviser and broker-dealer registration information. The study was
required by Section 919B of the Dodd-Frank Wall Street Reform and
Consumer Protection Act, Public Law 111-203, 124 Stat. 1376 (2010).
---------------------------------------------------------------------------
(c) Display of Additional Investment Adviser Representative Information
The SEC's Investor Advisory Committee (``IAC'') recommended the
development of more complete, simple and centrally operated search
functions that permit thorough understanding of the background of those
offering financial products and financial advice.\14\ Shortly after the
IAC's recommendations were issued, FINRA and SEC staff began discussing
how best to align changes to IAPD under consideration by the SEC with
possible changes to BrokerCheck to provide users with more
comprehensive, consistent, and easier access to information already
publicly disseminated about individuals that is contained in both
systems. On February 15, 2020, the SEC implemented changes to IAPD to
display information that is already publicly disseminated through
BrokerCheck.\15\ As such, FINRA is proposing to amend Rule 8312 to make
corresponding changes to allow the dissemination through BrokerCheck of
information already publicly disseminated through IAPD about registered
brokers who are, or were, licensed as investment adviser
representatives. This change would allow users of BrokerCheck to obtain
the available information about these individuals in a single search of
BrokerCheck or IAPD and thereby minimize the need to access multiple
databases.\16\
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\14\ The IAC's recommendations are available at https://www.sec.gov/spotlight/investor-advisory-committee-2012/final_iac_backgroundcheck_recommendation_071615.pdf.
\15\ This information includes self-regulatory organization and
state broker licenses, and broker qualification exams passed.
\16\ FINRA notes that the proposed rule change would impact
members that have elected to be treated as capital acquisition
brokers (``CABs''), given that the CAB rule set incorporates the
impacted FINRA rule by reference.
---------------------------------------------------------------------------
(d) Proposed Amendments
As previously discussed, information about brokers and investment
adviser representatives is filed with the CRD system through certain
registration forms. Some of the information reported for an investment
adviser representative is displayed in BrokerCheck if such an
individual also has, at some point, been registered as a broker.
Specifically, the following information reported by an investment
adviser representative (if displayed in IAPD) is made available through
BrokerCheck:
Current investment adviser firm (applies only to a
currently registered investment adviser representative);
identifying information (name changes, other names);
employment history for the past 10 years;
state qualification exams passed;
other business activities; and
disclosure events (excluding historic disclosure
events).\17\
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\17\ Historic disclosure events (i.e., certain disclosure events
involving customer dispute information reported in the CRD system
that became no longer reportable after an individual's first
investment adviser representative registration was approved but
before the individual's first broker registration was approved)
currently are not included in BrokerCheck.
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FINRA proposes to add new paragraph (d) to FINRA Rule 8312 to
provide that FINRA may release through BrokerCheck information already
publicly disseminated through IAPD about a BrokerCheck Associated
Person currently associated with a BrokerCheck Firm who is, or was,
licensed as an investment adviser representative.\18\ Accordingly,
under the proposed rule change, the following additional information
would be displayed through BrokerCheck for those individuals who are
currently dually registered as a broker and an investment adviser
representative:
---------------------------------------------------------------------------
\18\ A ``BrokerCheck Firm'' is a current or former FINRA member
or a current or former member of a registered national securities
exchange that uses CRD for registration purposes. See FINRA Rule
8312(a)(1). See also supra note 4.
---------------------------------------------------------------------------
State investment adviser representative licenses;
current and past investment adviser firms, registered
branches, and non-registered locations that are not private residences
where the individual is or was registered;
historic disclosure events; and
professional designations.\19\
---------------------------------------------------------------------------
\19\ Should the SEC in the future make additional categories of
information about investment adviser representatives publicly
available in IAPD, FINRA will consult with the SEC regarding the
dissemination of the additional information through BrokerCheck. The
dissemination through BrokerCheck of the additional information may
apply to those individuals who are currently dually registered as a
broker and an investment adviser representative, as well as those
individuals who are currently registered as a broker and were
previously registered as an investment adviser representative.
---------------------------------------------------------------------------
In addition, for those individuals who are currently registered as
brokers and were previously registered as investment adviser
representatives, BrokerCheck would display all of the publicly
disseminated additional investment adviser representative information
listed above, except for professional designations because a previously
reported professional designation may no longer be in effect. However,
if a registered broker currently holds a professional designation, this
information would be displayed through BrokerCheck if reported by the
broker via Form U4.
For any individual who currently is not registered as a broker,
such as a currently registered investment adviser representative who
was formerly registered as a broker, the additional investment adviser
representative information referenced above would not be displayed
through BrokerCheck. As it does today, BrokerCheck would continue to
include a link to IAPD for those individuals who are or were previously
registered in an investment adviser representative capacity so that
investors could obtain further information about such individuals in
that system.\20\ Furthermore, FINRA
[[Page 26505]]
plans to add a notation in BrokerCheck for formerly registered brokers
who currently are registered as investment adviser representatives
indicating that more current information regarding the investment
professional is available in IAPD.
---------------------------------------------------------------------------
\20\ Similarly, with respect to firms, BrokerCheck will continue
to include a link to the summary page of IAPD for a broker-dealer
that also is registered as an investment adviser. From the IAPD
summary page, users can easily view a PDF version of the most
recently filed Form ADV for that firm. In addition, Form CRS will be
accessible through BrokerCheck and IAPD upon its implementation in
2020. See Form CRS Relationship Summary; Amendments to Form ADV,
Securities Exchange Act Release No. 86032 (June 5, 2019), 84 FR
33492 (July 12, 2019).
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FINRA has filed the proposed rule change for immediate
effectiveness. FINRA anticipates that the implementation date of the
proposed rule change will be June 20, 2020.
2. Statutory Basis
FINRA believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(6) of the Act,\21\ which requires, among
other things, that FINRA rules must be designed to prevent fraudulent
and manipulative acts and practices, to promote just and equitable
principles of trade, and, in general, to protect investors and the
public interest.
---------------------------------------------------------------------------
\21\ 15 U.S.C. 78o-3(b)(6).
---------------------------------------------------------------------------
Following ongoing discussions with SEC staff, FINRA is proposing to
amend Rule 8312 to allow the dissemination through BrokerCheck of
information already publicly disseminated through IAPD about registered
brokers who are, or were, licensed as investment adviser
representatives. The proposed rule change will align BrokerCheck with
the changes the SEC implemented to IAPD on February 15, 2020, and will
allow investors and other users of BrokerCheck to obtain the available
information that already is publicly disseminated about these
individuals in a single search of BrokerCheck or IAPD and thereby
minimize the need to access multiple systems. FINRA believes that the
proposed rule change will provide investors and other users of
BrokerCheck with more consistent and easier access to information about
the investment professionals with which they may conduct business
because it will result in BrokerCheck displaying the same level of
information that currently is available in IAPD.
B. Self-Regulatory Organization's Statement on Burden on Competition
FINRA does not believe that the proposed rule change will result in
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act.
Economic Impact Assessment
FINRA has undertaken an economic impact assessment, as set forth
below, to further analyze the regulatory need for the proposed rule
change, its potential economic impacts, including anticipated costs,
benefits, and distributional and competitive effects, relative to the
current baseline, and the alternatives FINRA considered in assessing
how best to meet its regulatory objective.
Regulatory Need
BrokerCheck provides the public with information on the
professional background, business practices, and conduct of FINRA
member firms and their associated persons. FINRA believes, however,
that changes to the information presented in BrokerCheck can make
BrokerCheck more useful for investors and other users of the system.
Accordingly, FINRA is proposing to add to BrokerCheck investment
adviser representative information for those individuals who are
currently registered as brokers, and who are currently or were
previously registered as investment adviser representatives.
Economic Baseline
The economic baseline for the rule change is the current rule that
addresses the types of information displayed in BrokerCheck. The
proposal is expected to affect users of BrokerCheck, and currently and
formerly registered firms and individuals. Users of BrokerCheck include
investors, member firms and other entities in the financial services
industry, and individuals registered as brokers or seeking employment
in the brokerage industry.
The information displayed in BrokerCheck is derived from the CRD
system. In general, the information enables users to make informed
decisions regarding the firms currently registered as broker-dealers
and the individuals currently registered as brokers. Decisions include
the choice of firms or individuals to do business with or employ, and
the choice of firms with which to seek employment.
The ability of users to access and review information related to
individual brokers through BrokerCheck is constrained by certain
limitations. One of these limitations is that BrokerCheck currently
provides indirect access to information describing the investment
advisory business of a broker, requiring users to access a separate
system (IAPD) to gather additional information that could be relevant
to their decision. The need to access a separate system increases
users' search costs and reduces their ability to research and compare
information about individuals in the brokerage industry.
Economic Impacts
The proposed rule change would increase the amount of investment
adviser information available or accessible through BrokerCheck, but
would not change the aggregate information available to users of
BrokerCheck and IAPD. Users of BrokerCheck would no longer need to
access a separate system--IAPD--to obtain the information for
individuals currently registered as brokers who are, or were, licensed
as investment adviser representatives.\22\ The ability to review this
information in a more efficient manner would reduce user search costs,
particularly for users that seek individuals who are experienced in or
can offer both brokerage and advisory services. These users would also
benefit by doing business with or employing individuals or firms with
individuals that are experienced in or can offer services more closely
aligned with their needs, thereby increasing their economic welfare.
---------------------------------------------------------------------------
\22\ BrokerCheck maintains information on 3,610 firms currently
registered as broker-dealers and 625,000 individuals currently
registered as brokers. Among the firms currently registered as
broker-dealers, 526 (15 percent) are currently registered as
investment advisers and 130 (four percent) were formerly registered
as investment advisers. Similarly, among the individuals currently
registered as brokers, 295,120 (47 percent) are currently registered
as investment adviser representatives, and 16,458 (three percent)
were formerly registered as investment adviser representatives.
---------------------------------------------------------------------------
Information that may become available or more accessible through
BrokerCheck includes information relating to historic disclosure events
of investment adviser representatives. Disclosure events reported to
the CRD system, which include customer complaints, have been found to
be predictive of future misconduct.\23\ The review and consideration of
this additional information before the selection of an individual with
whom to do business or to employ may improve investor protections by
increasing the ability of users to understand the potential risk of
misconduct. It is anticipated, however, that there will not be a
significant number of Historic Disclosure events to be displayed
[[Page 26506]]
through BrokerCheck. The economic impact of this aspect of the proposed
rule change, therefore, is expected to be limited.
---------------------------------------------------------------------------
\23\ See Hammad Qureshi & Jonathan Sokobin, Do Investors Have
Valuable Information About Brokers? (2015), https://www.finra.org/sites/default/files/OCE-Working-Paper.pdf. See also Mark Egan,
Gregor Matvos & Amit Seru, The Market for Financial Adviser
Misconduct, 127(1) Journal of Political Economy 233-295 (2019); and
Stephen G. Dimmock, & William C. Gerken, Predicting Fraud by
Investment Managers, 105(1) Journal of Financial Economics 153-173
(2012).
---------------------------------------------------------------------------
The proposed rule change is not expected to harm or hinder
competition among individuals currently registered as brokers who were
previously registered as investment adviser representatives. Under the
proposed rule change, similar past employment information as an
investment adviser representative would be displayed through
BrokerCheck regardless of whether that previous employment was at (1) a
firm dually registered as a broker-dealer and an investment adviser, or
(2) a firm solely registered as an investment adviser. Information is
also currently available through IAPD describing the investment adviser
firms at which the individuals were previously employed.
Alternatives Considered
No alternatives were considered for this proposed rule change.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \24\ and Rule 19b-
4(f)(6) thereunder.\25\
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\24\ 15 U.S.C. 78s(b)(3)(A).
\25\ 17 CFR 240.19b-4(f)(6).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-FINRA-2020-012 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-FINRA-2020-012. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10 a.m. and 3
p.m. Copies of such filing also will be available for inspection and
copying at the principal office of FINRA. All comments received will be
posted without change. Persons submitting comments are cautioned that
we do not redact or edit personal identifying information from comment
submissions. You should submit only information that you wish to make
available publicly. All submissions should refer to File Number SR-
FINRA-2020-012 and should be submitted on or before May 26, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\26\
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\26\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-09374 Filed 5-1-20; 8:45 am]
BILLING CODE 8011-01-P
