What is BrokerCheck and How Can It Impact My Career In Financial Services?

BrokerCheck is an online platform provided and maintained by the Financial Industry Regulatory Authority (FINRA) that provides the general public with easy access to important information related to the background and experience of FINRA registered brokers and brokerage firms. BrokerCheck is a free tool that provides the investing public the opportunity to review a firm or broker’s history and qualifications before entering into an investment relationship. Initially created in 1988 by the National Association of Securities Dealers (NASD), FINRA’s predecessor, since its inception BrokerCheck has served as an innovative and invaluable resource to the investing public and financial institutions.

Additionally, BrokerCheck effectively represents a FINRA licensed professional’s public-facing CV, meaning information reported in a BrokerCheck report can considerably impact a financial professional’s reputation. FINRA licensed professionals must stay apprised of the information reported on their BrokerCheck report to ensure that their careers are not detrimentally impacted by negative information.

BrokerCheck reports include a host of information about a given financial professional, including qualifications and licensing information, employment history, customer complaints, regulatory investigations, criminal convictions, and more.

BrokerCheck reports begin with a summary page that provides a snapshot of the overall report. The snapshot includes a financial professional’s current registration and employment status, the number of licenses the professional possesses, as well as an overview of any disclosure events related to the financial professional.

BrokerCheck reports next outline a FINRA registered representative’s qualifications, designations, and licenses. This section of the report will detail any self-regulatory organizations that a financial professional is registered with, like FINRA, NASDAQ, or the New York Stock Exchange, or with any individual states. This section of the report also discloses any FINRA examinations that a financial professional has passed, including general industry or product exams, principal or supervisory exams, and any state level exams. FINRA licensed professionals should periodically review their BrokerCheck report to confirm that their qualifications, designations, and licenses are accurately reflected to the investing public.

The next section of a BrokerCheck report details an individual’s registration and employment history. The registration portion outlines the FINRA member firms with which a financial professional has been registered in the past. This section includes the time period that an individual was registered with a FINRA member firm as well as the branch office through which the individual was employed. The employment history portion of the report is a broader view on FINRA licensed individual’s employment history. This portion is automatically generated from an individual broker’s Form U4 and details up to 10 years of the individual broker’s employment history.

This area of a BrokerCheck report also outlines any approved outside business activities in which a broker is permitted to engage. This section relates to business activities that a broker engages in as a proprietor, partner, officer, director, employee, trustee, agent or otherwise. When a FINRA licensed individual wishes to engage in an outside business activity, he or she must first seek approval from their member firm pursuant to FINRA Rule 3270 and Rule 3280. Notably, certain non-investment related activities that are solely charitable, civic, religious, fraternal or tax exempt may not require approval and disclosure under these rules. FINRA registered representatives should routinely review their BrokerCheck report to ensure that their registration and employment histories are accurately disclosed to FINRA and the public. Failures to update relevant information with FINRA can lead to investigations, sanctions, and even a bar from the industry.

The last, and arguably the most important, section of a BrokerCheck report is the Disclosure Events summary. Disclosure Events that FINRA is concerned with generally fall into several categories: customer complaints, regulatory inquiries, personal financial events, and criminal occurrences. Customer complaint disclosures relate to any informal or formal complaints lodged against a registered representative by a customer, as well as any civil legal actions or arbitrations initiated against or naming the registered representative. Regulatory disclosures relate any investigations or sanctions initiated against a registered representative by a regulatory body, like FINRA, the SEC, or state-level regulators. Personal financial events disclosed in a BrokerCheck report typically relate to judgments or liens filed against a registered representative. Finally, the criminal disclosures section details any criminal actions initiated against a registered representative, including any charges and final dispositions.

Whether it be your reputation, employment prospects, advancement opportunities, or a desire to earn more licenses, BrokerCheck can have a huge impact on your career as a FINRA licensed financial professional.

Given the public availability of BrokerCheck reports, as well as FINRA’s high search engine optimization capabilities, your BrokerCheck is guaranteed to affect your professional reputation in the industry. BrokerCheck is likely to be a potential customer’s first stop when deciding whether to do business with you and you want to ensure that you make a good first impression. If you have reportable complaints lodged against you or if you have been named in a customer’s arbitration, prospective clients will be readily able to learn such information and may decline to engage your services. Removing harmful information from your BrokerCheck report requires filing an expungement action in FINRA Arbitration, which can required extensive commitments of time and money.

Similarly, if you seek new employment in the financial services industry or in other industries, there is a high likelihood that a potential employer will come across your BrokerCheck Report. Further, prospective, FINRA-member firm employers will have access to the Central Repository Database (CRD) which includes even more detailed disclosures and information about your past employment than your BrokerCheck report.

Even if you do not anticipate an impending job change, harmful disclosures on your BrokerCheck can even inhibit your career advancement opportunities with your current firm. In 2022, FINRA implemented FINRA Rule 4111 to address risks presented by broker-dealers with significant histories of misconduct, including firms with high concentrations of registered representatives with significant histories of misconduct. The rule allows FINRA to place certain restrictions and requirements on member firms to better protect the investing public from misconduct. Since the rollout of Rule 4111, firms have been increasingly reluctant to hire brokers and other financial professionals who have disclosures on their records, especially individuals with 7F disclosures. For similar reasons, firms are hesitant to promote and advance employees with significant disclosure histories.

In addition to FINRA and state-level licenses, many financial professionals also seek professional designations from third-party organizations that could be impacted by harmful BrokerCheck disclosures. Many professional organizations, such as the Certified Financial Planner Board of Standards, have stringent ethical obligations that may be incompatible with prior disclosed events of misconduct.

There are a host of ways financial professionals can ensure that their BrokerCheck reports remain clean, including compliance and continuing education.

First and foremost, by far the best way to protect your license from detrimental disclosures is through compliance with federal regulations, FINRA Rules, and your firm’s policies and procedures. When investment products and services are provided in accordance with applicable rules, regulations, and policies, the potential for misconduct and alleged complaints therefrom drop immensely. Securities regulations are in place to protect the investing public and complying with the same is the best way to protect your BrokerCheck report.

Another way to help protect your license against harmful disclosures is through Continuing Education courses. Although most firms offer Continuing Education in house, financial professionals are certainly empowered to voluntarily complete other, outside Continuing Education courses or programs. Voluntary Continuing Education can be a good way to stay apprised of new industry trends and to learn best practices when servicing your customers, which can help prevent against misconduct.

Although amendments to your CRD can be implemented through more informal channels, FINRA Arbitration is the primary mechanism to expunge disclosures from your BrokerCheck report.

A FINRA expungement action is effectively a full case requiring document collection and review, filing pleadings, conducting discovery, and ultimately presenting documentary and witness evidence to an arbitration panel to rule on the merits of the dispute. Expungement actions can take extensive time and money, so it is highly recommended that your retain experienced expungement counsel, like the attorneys at Malecki Law in NYC, to help guide you through the process and give you the best opportunity to clear your record.