SEC urges more access to broker, adviser data

U.S. securities regulators on Thursday called for improvements to help investors conduct background research on financial professionals such as brokers and investment advisers.

The recommendations were outlined in a study drafted by staff at the Securities and Exchange Commission.

The study, which was required under the Dodd-Frank Wall Street reform law, looks at ways that investors can better access information about financial professionals.

A key suggestion in the study calls for making it easier for investors to look up information on brokers and advisers simultaneously through one online search. Today, investors must go into an online database on the Financial Industry Regulatory Authority's website to look up background on brokers and the SEC's website to gather details on investment advisers.

Additionally, the study calls for improving search functions within the broker and investment adviser databases so investors can find a financial professional near them by looking under their zip code.

The study's recommendations now must be implemented within 18 months.

This marks the third study the SEC has completed this month pertaining to investment advisers and broker-dealers.

All three of them have sought in various ways to harmonize differences between how investment advisers and brokers are regulated.

The first study laid out ways to enhance oversight of investment advisers. Unlike brokers, which are self-policed by Finra, investment advisers don't have a self-regulatory group. That study called on Congress to either let the SEC impose user fees on the industry to help it step up the frequency of adviser examinations, create a special new self-regulatory group for advisers or empower Finra to oversee some advisers.

The second study, released last week, called for imposing a uniform fiduciary standard on advisers and brokers offering retail customers advice. The SEC called for the standard amid fears that investors can't tell the legal differences between advisers acting in their best interest or brokers who are selling products.

In the SEC's latest study, staff said that ideally it would be better to create a single, centralized database where investors can look up licensing, disciplinary history or other information about brokers and advisers.

Because of the tight deadlines required in Dodd-Frank, however, the study said a full merger may not be feasible. Instead, it calls for a "less structural change" by which the databases would remain separate, but the search returns would be unified.

[Source: By Sarah N. Lynch, Reuters, Washington, 28Jan11]

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