A proposal that would allow investors to access a single portal for important information on advisors and brokers is drawing support in the financial industry, Advisor Hub reports.
It was one of the topics addressed recently during the Securities and Exchange Commission’s Investor Advisory Committee panel discussion. Regulators have raised the idea of a single, one-stop shopping type of portal where investors could review information on the backgrounds of prospective financial advisors, including their disciplinary histories.
“One way that coordination can be improved, and investor education can also be improved is by providing a single unified database for all licensed financial advice,” Edwin Hu, an associate professor at the University of Virginia School of Law, told the panel.
The Financial Industry Regulatory Authority has a BrokerCheck database while the SEC has a website called Investment Advisor Public Disclosure (IAPD), both drawing information about registered investment advisors from the Central Registration Depository site run by state securities regulators. An SEC staff report to Congress said that due to the lack of uniform disclosure standards on the IAPD website, RIAs may be able to “conceal allegations of wrongdoing” made in private arbitration forums.
In recent years there have been discussions of creating a unified portal to coordinate reporting on financial professionals. FINRA President Robert Cook said this would prevent brokers who have been barred or have negative aspects of their records from moving to a different segment of the industry to keep selling insurance or other financial products.
“Investors and consumers who try to perform their own due diligence on someone pitching them on a financial product or service face daunting challenges,” Cook said in a keynote at Finra’s Foundation conference. “Someone with a problematic history in one industry might move to another, so checking only one database might create the false impression that the person has a clean history.”
Cook said there has been backing for a unified database that would take the place of or add “to the current disaggregated system of separate websites maintained by different federal and state agencies and related organizations.”
Hu noted the difficulty of finding information on insurance brokers who sell annuity products and could pose a risk of harm to investors. He cited studies indicating that if investors could avoid working with the bottom 5% of financial advisors in the industry, they could reduce fraud cases by 29% and monetary losses by 40%.
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