Flawed Attempt For A Good Idea
by Stephen Kohn, Stephen A. Kohn & Associates, Ltd.
When first conceived and drafted, FINRA Rule 8312: FINRA BrokerCheck Disclosure provided the public with an effective way to investigate their investment professional's background. As Bill Singer so well presented in FINRA Rule 8312: The Indecipherable Swamp of BrokerCheck (BrokeAndBroker.com Blog, March 21, 2017), his analysis of Rule 8312 underscored how a well-intentioned tool for investors has been revised and amended into a mess.Perhaps I have become somewhat jaded by the fact that I came into this business in 1984, after taking my Series 7 exam the old-fashioned-way on paper. The thought of running afoul of the "Rules & Regs" never entered my mind. On top of that, my wife told me that if I ever went to jail, she would never visit. Hell, thirty-three-years ago, you could open a new account with almost no information other than name, address, telephone number, social security number, income and net worth. Now they want ten forms of photo ID, your passport, your driver's license, proof of this, proof of that, and a letter of recommendation from your High School gym teacher.Not only are public customers confronted with more paperwork to open and maintain their accounts but those of us in the industry are faced with a four-inch thick rulebook, written single spaced, on tissue paper in legal mumbo-jumbo and a BrokerCheck system that is not living up to its promise. As the owner of a small FINRA member firm, I have come to view BrokerCheck as a threat to my existence. Why? Because FINRA has allowed what should be an important tool for investor education to be utilized as a destructive tool by which large firms can launch the digital equivalent of a raid on their smaller competitors. How does this modern piracy work? First, a recruiter, who is usually on assignment for a large FINRA member firm, goes to the Home Page of BrokerCheck and enters into the right-side box asking for "City, State, or Zip (optional)," the Zip Code for the area where a firm is looking to expand into or looking to recruit veteran registered representatives from. And, lo and behold, once you enter a Zip Code, the BrokerCheck search results will list the name of every Rep and firm with which he's registered within that area. Now all the recruiter has to do is look up the firm's telephone number and voila, your Reps become recruiting targets.