In recent years, questions have been raised in many quarters about how brokers with questionable backgrounds have been able to move among firms and remain in the industry. FINRA has responded by enhancing a broker-dealer’s obligations for reviewing the backgrounds of its newly hired brokers.
The SEC recently approved proposed FINRA Rule 3110(e), which requires FINRA member firms to verify the information in Form U4 within 30 calendar days of filing. The proposed rule, which will take effect on July 31, 2015, is intended to improve the information that winds up in FINRA’s Central Registration Depository (CRD) and BrokerCheck. FINRA’s 2015 Regulatory and Examinations Priorities Letter (January 6, 2015) discusses its concern with “high-risk and recidivist brokers,” including firms’ due diligence on prospective hires, and highlights the proposed rule with respect to investor protection.
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