On October 25, 2007, the Financial Industry Regulatory Authority (FINRA) censured and fined the brokerage firm UBS Financial Services $370,000 for failing to report critical information about its brokers, including customer complaints, regulatory actions and criminal disclosures, on FINRA’s Central Registration Depository (CRD).
The CRD is very important to investor protection because the system is designed to keep track of an individual broker’s and brokerage firm’s disciplinary history. Through the CRD system, investors have the ability to assess the background of brokers and make a more informed decision about whether to hire or retain them to manage their money. To find out more information about your broker, visit the Broker Check link on FINRA’s homepage, www.finra.org.
Page Perry’s experience with FINRA’s Broker Check feature is that the CRD reports generated are not as complete as the CRD reports that are also available through state securities regulators. To obtain a copy of a CRD Snapshot report from your state regulator, visit the North American Securities Administrators Association’s (NASAA) website, www.nasaa.org, to obtain your state securities regulator’s contact information. The NASAA website also has helpful information in the Senior Investor Resource Center section on how to avoid becoming a victim of investment fraud.
Page Perry has also represented investors against brokerage firms for failing to report accurately the reasons that a broker departs from a firm. For example, in many instances, an unscrupulous broker will get fired from Firm A for defrauding his or her customers. Firm A, however, falsely reports the broker’s departure as “voluntary.” The unscrupulous broker is then able to get hired at Firm B where he or she defrauds more customers. In fact, in many cases, customers who have already been defrauded at Firm A will unknowingly follow the unscrupulous broker to Firm B because of the trust relationship that exists between the customer and the broker. In this circumstance, Firm A may be able to be held liable for the losses at Firm B because the unscrupulous broker would never have been hired at Firm B had the truth been disclosed about his departure from Firm A.
As stated in FINRA’s press release, “Investors, regulators and others rely heavily on the accuracy and completeness of the information in the CRD public reporting system – and, in turn, the integrity of that system depends on timely and accurate reporting by firms,” said Susan Merrill, FINRA Executive Vice President and Chief of Enforcement.