Plan to Put Broker Disciplinary Records Online Gains
The National Assn. of Securities Dealers has secured the support of an influential congressman for its plan to put brokers’ disciplinary records online, an initiative delayed for the last five years.
Rep. Michael G. Oxley (R-Ohio), chairman of the House Financial Services Committee, is co-sponsoring a bill that would shield the NASD from liability if it inadvertently places inaccurate broker information on the Web.
The NASD, which polices all U.S. brokers, postponed its Internet program after determining that it could be sued for distributing incorrect data on the Web, said Mary Schapiro, president of the NASD’s regulatory arm.
The NASD plan also ran into technological hurdles and broker opposition after Schapiro announced it in 1996.
Oxley included an immunity clause for the NASD Internet project in a 59-page bill that would link the fraud databases of U.S. financial regulators and law-enforcement agencies.
“If Chairman Oxley makes this a priority and moves it through committee, it could get passed,” said Jeff Duncan, a senior aide to Rep. Edward J. Markey (D-Mass.), who supports the NASD’s disclosure plan.
The financial services panel has not yet scheduled a vote on the bill.
Investor interest in the NASD records grew in the mid-1990s after regulators revealed that disciplined brokers at firms such as A.R. Baron & Co. and Stratton Oakmont Inc. were moving to other brokerages. Some of these brokers continued to defraud investors in their new jobs.
In 1996, Schapiro announced plans to let investors use the NASD’s Web site to obtain immediate access to brokers’ disciplinary records, including fines, suspensions and arbitration awards. Her high-profile initiative won the endorsement of Arthur Levitt, then chairman of the Securities and Exchange Commission, and consumer groups.
“The easier you make it for investors, the more likely they are to check out brokers’ backgrounds,” said Barbara Roper of the Consumer Federation of America.
The NASD plan first was delayed when the industry group changed the technology of its database to make more use of the Internet. Then the NASD had to deal with brokers who objected to including consumer complaints and nonfinancial felony convictions in the database. The NASD decided to go ahead and include those records.
As the NASD was about to launch the Internet database in early 1999, the SEC informed the industry group that it lacked legal protection for inaccurate data posted on the Web. The NASD made a last-minute decision to seek protective legislation.
Investors now can request brokers’ histories by calling a toll-free number or sending an e-mail request to the NASD, which can then e-mail the records. State securities regulators also keep these records.
The NASD is exempt from liability for inaccurate information furnished unintentionally in one-to-one correspondence by mail, telephone or electronic mail, Schapiro said.
