FINRA’s withdrawal of its proposed rule on BrokerCheck has been big news in the past week. Coverage on the issue has come from Reuters, The Chicago Tribune, InvestmentNews, Financial Planning, Wealth Management and several others.
So what’s the big deal?
The proposed (and now withdrawn) rule stated that firms and financial advisors would have to display a prominent description (provided by FINRA) and link to BrokerCheck on all professional websites, social media accounts, and any other “comparable internet presences.” The link would go to the BrokerCheck page for that specific firm or advisor. FINRA’s goal in implementing policies that will better inform investors about the firms and advisors they trust with their finances is a good one, but the language of this specific rule was a cause for some concern.
For example, it was unclear what FINRA was contemplating by “all comparable internet presences.” What if there is an online directory that has an entry for an advisor that he or she has no knowledge of, and no control over? Another problem related to specific social media platforms. If you’re on LinkedIn, Twitter, or Facebook, where would the FINRA-provided “prominent description” need to be placed? On Twitter, profile descriptions are limited to 160 characters, including a web address. On Linkedin, a website description in a user’s profile is limited to 30 characters. What if you use a platform that doesn’t allow for images or links in the required format or character allotment isn’t enough? What is the liability if something is missed? Do the technology tools even exist for firms to monitor and enforce this new requirement on advisors’ websites and social media accounts? Should advisors just stop using certain social media tools altogether? The lack of clarity in the proposed rule prompted a great deal of confusion, and would have had negative consequences for advisors and their ability to communicate – and therefore provide valuable service – to investors.
FSI’s Executive Vice President & General Counsel David Bellaire commented on the decision, saying, “While we greatly value expanding investor knowledge of and use of BrokerCheck, we believe the proposed rule was vague, highly burdensome and did not appropriately achieve this goal. There is simply no way in many cases for a link to BrokerCheck to be prominently displayed on social media sites and, therefore, the rule is impossible to implement. FSI and our members hope to work with FINRA to develop a workable solution which truly provides investors with access to BrokerCheck information.”
By listening to feedback on this rule and reevaluating the unintended negative consequences it could have on the affected parties (in this case, financial services firms, financial advisors and investors), FINRA has created a precedent for a healthier regulatory environment by going back to the drawing board to create a rule that truly informs investors and is implementable for advisors and firms.
What are your thoughts on this decision? Share in the comments, below!