March 5 (Reuters) – In an ideally-transparent world,
you’d know as much about your broker as you know about the
ingredients in packaged junk food label: All of the bad stuff
would be instantly on display in some kind of nutritional label.
But in the U.S., some of the most important information
about a broker is off limits to individual investors.
At present, you can do broker background checks through a
web-based system run by the Financial Industry Regulatory
Authority, the trade group that regulates the securities
industry (FINRA), called BrokerCheck ().
Or contact your state securities regulator. FINRA’s site
contains incomplete records, since it’s self-reported. And while
state regulators often have fuller reports, most investors will
probably not know that they are available, and those regulators
may not always be accessible nor may their reports be
The information gap between state authorities and FINRA has
existed for years. FINRA, which has been slowly improving
disclosure (see), is now seeking
comments – send emails to email@example.com – from the public on
how to improve the service.
What kind of information is essential? Here’s what you need
to know that isn’t being fully disclosed by FINRA: