[Federal Register Volume 79, Number 2 (Friday, January 3, 2014)]
[Notices]
[Pages 419-420]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-31420]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71195; File No. SR-FINRA-2013-047]


Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Order Approving a Proposed Rule Change To Amend FINRA 
Rule 8312 (FINRA BrokerCheck Disclosure) To Include Information About 
the Member Firms and Their Associated Persons of Any Registered 
National Securities Exchange That Uses the CRD System for Registration 
Purposes

December 27, 2013.

I. Introduction

    On November 1, 2013, the Financial Industry Regulatory Authority, 
Inc. (``FINRA'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to amend FINRA Rule 8312 (FINRA BrokerCheck 
Disclosure) to include in BrokerCheck information about the members and 
their associated persons of any registered national securities exchange 
that uses the Central Registration Depository (``CRD[supreg]'') for 
registration purposes. The proposal was published for comment in the 
Federal Register on November 20, 2013.\3\ The Commission received two 
comments on the proposal.\4\ This order approves the proposed rule 
change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 70880 (November 14, 
2013), 78 FR 69732 (November 20, 2013) (``Notice'').
    \4\ See letter from Jason Doss, President, Public Investors 
Arbitration Bar Association, to Elizabeth M. Murphy, Secretary, 
Commission, dated December 9, 2011 (``PIABA letter'') and letter 
from William A. Jacobsen, Clinical Professor of Law, Cornell 
University Law School and Michael Baak, to Elizabeth M. Murphy, 
Secretary, Commission, dated December 11, 2013.
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II. Description of the Proposal

    In 2006, Congress amended Section 15A(i) of the Act \5\ with the 
enactment of the Military Personnel Financial Services Protection 
Act.\6\ The amendment added a requirement that FINRA maintain a toll-
free telephone listing and a readily accessible electronic or other 
process to receive and promptly respond to inquiries regarding 
registration information on the members and their associated persons of 
any registered national securities exchange that uses the CRD system to 
register its members and their associated persons (``CRD 
Exchange'').\7\
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    \5\ 15 U.S.C. 78o-3(i).
    \6\ Public Law 109-290, 120 Stat. 1317 (2006).
    \7\ Section 15A(i) of the Act defines registration information 
as ``the information reported in connection with the registration or 
licensing of brokers and dealers and their associated persons, 
including disciplinary actions, regulatory, judicial, and 
arbitration proceedings, and other information required by law, or 
exchange or association rule, and the source and status of such 
information.''
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    BrokerCheck provides the public with information on the 
professional background, business practices, and conduct of FINRA 
member firms and their associated persons. The information that FINRA 
releases to the public through BrokerCheck is derived from the CRD 
system, the securities industry online registration and licensing 
database. FINRA member firms, their associated persons, and regulators 
report information to the CRD system via the uniform registration 
forms. By making certain of this information publicly available, 
BrokerCheck, among other things, helps investors make informed choices 
about the FINRA member firms and their associated persons with which 
they conduct business. BrokerCheck allows investors and others to 
obtain registration information about FINRA member firms and their 
associated persons by telephone and the Internet.\8\
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    \8\ The BrokerCheck Hotline telephone number is (800) 289-9999. 
BrokerCheck is available online at http://www.finra.org/Investors/ToolsCalculators/BrokerCheck.
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    The registration information currently available through 
BrokerCheck is limited to firms that are currently or were previously 
members of FINRA and the associated persons of such firms. BrokerCheck 
does not contain information regarding firms or the associated persons 
of such firms, if the firms were only members of a registered national 
securities exchange (although such information is contained in the CRD 
system).
    The proposed rule change would amend FINRA Rule 8312 to include 
these non-FINRA member firms and their associated persons in 
BrokerCheck. Specifically, the proposed rule change would make publicly 
available in BrokerCheck information about members and their associated 
persons of any CRD Exchange.\9\ The information that would be disclosed 
through BrokerCheck about CRD Exchange members and their associated 
persons would be the same as the information disclosed about FINRA 
members and their associated persons pursuant to FINRA Rule 8312. CRD 
Exchange members and their associated persons would be able to dispute 
inaccuracies in their BrokerCheck reports as provided for in FINRA Rule 
8312(e).\10\
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    \9\ Firms and individuals that have been registered exclusively 
with a CRD Exchange will be included in BrokerCheck only if they 
were registered on or after August 16, 1999. According to FINRA, 
filings for those firms and individuals whose registrations 
terminated before August 16, 1999, were not made electronically, so 
BrokerCheck reports for such firms and individuals cannot be made in 
an automated fashion. See proposed Supplementary Material .03 to 
FINRA Rule 8312.
    \10\ The proposed rule change also makes non-substantive 
technical changes to FINRA Rule 8312 to reflect a change in FINRA's 
style convention for referencing the CRD system.
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Summary of Comments
    The Commission received two comment letters on the proposed rule 
change.\11\ Both comments support the proposal. One commenter states 
``The significance of increasing public customers' awareness and access 
to background information about the member and/or associated person 
handling or potentially handling their account cannot be understated.'' 
\12\ The commenter suggests FINRA should include in BrokerCheck all 
information that is available on CRD reports from state regulators, 
eliminate time constraints for disclosure of information in 
BrokerCheck, and include in BrokerCheck disclosures about an associated 
person's educational background and professional designation.\13\ While 
these comments are outside of the scope of the current proposal, they 
are legitimate and FINRA should consider them.
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    \11\ See supra, note 4.
    \12\ See PIABA letter at 1.
    \13\ See PIABA letter.
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III. Discussion and Commission Findings

    After carefully reviewing the proposed rule change and the comment 
letters, the Commission finds that the proposal is consistent with the 
requirements of the Act and the rules and regulations thereunder 
applicable to a national securities association.\14\ In particular, the 
Commission finds that the proposal is consistent with Section 15A(b)(6) 
of the Act,\15\ which requires, among other things, that FINRA's rules 
be designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, to remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system, and, in general, to protect investors and the 
public interest.
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    \14\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \15\ 15 U.S.C. 78o-3(b)(6).
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    Specifically, the Commission believes that the proposal will 
enhance investor

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protection by making available, via BrokerCheck, information regarding 
the professional background, business practices, and conduct of firms 
and associated persons that were members solely of a national 
securities exchange. Making this information available via BrokerCheck 
harmonizes the disclosure across the securities industry. The 
information is relevant to investors and members of the public who wish 
to educate themselves with respect to a firm or the professional 
history of a current or formerly associated person of a CRD Exchange. 
Further, the public's ability to access information regarding a firm or 
current or former associated person, whether the individual is or was 
associated with FINRA or with any national securities exchange that 
uses CRD for registration purposes, may serve to protect investors, the 
integrity of the marketplace, and the public interest. The Commission 
urges the public to utilize BrokerCheck as well as all other sources of 
information, particularly the databases of the state regulators, as 
well as legal search engines, and records searches, to conduct a 
thorough search of a firm or any associated person's activities.
    Furthermore, the proposed rule change is consistent with the 
provisions of Section 15A(i)(1) of the Act,\16\ which require, among 
other things, that FINRA maintain a toll-free telephone listing and a 
readily accessible electronic or other process to receive and promptly 
respond to inquiries regarding registration information on CRD Exchange 
members and their associated persons. The proposed amendments require 
FINRA to release information through BrokerCheck about CRD Exchange 
members and their associated persons,\17\ harmonizing the information 
available about broker-dealers and their associated persons across the 
industry.
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    \16\ 15 U.S.C. 78o-3(i)(1).
    \17\ See Section 15A(i) of the Act.
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    Finally, the Commission reiterates the need for FINRA to 
continuously strive to improve BrokerCheck to enhance its value as a 
tool for the public to use in deciding whether to work with a firm or a 
particular associated person.\18\ The suggestions for enhancement made 
by the commenter while outside the scope of this proposal should be 
considered.
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    \18\ See, e.g., Securities Exchange Act Release Nos. 59916 (May 
13, 2009), 74 FR 23750 (May 20, 2009) and 62476 (July 8, 2010), 75 
FR 41254 (July 15, 2010).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\19\ that the proposed rule change (SR-FINRA-2013-047), be, and 
hereby is, approved.
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    \19\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Lynn M. Powalski,
Deputy Secretary.
[FR Doc. 2013-31420 Filed 1-2-14; 8:45 am]
BILLING CODE 8011-01-P