Tentative Accord Reforms Brokerage Disclosure Rules

Article excerpt

State regulators and brokerage industry representatives have reached a tentative agreement on changes in the amount of information about a broker that could be disclosed to states - and through them to investors.

Stephen Diamond, the Maine securities commissioner who is chairman of a committee of state regulators that had been bargaining on the issue, said the agreement reached Wednesday would result in earlier disclosure of many disputes with customers, but would also mean that some settlements with customers that are now disclosed would not be reported.

The two groups had been arguing for years about the disclosures, which began to bother the industry when reporters got information on brokers from state regulators and wrote about them. The brokers argued that the reports often contained stale information, including reports of complaints by customers that were never pursued.

Information on brokers is reported to a "central registration depository" of the National Association of Securities Dealers, known as the CRD. That information is then available to all states, which can use it to decide whether to license a broker.

The NASD has released censored versions to the public, but many states have released complete records to anyone who asks about a specific broker. It is generally considered wise to check the record of a broker before doing business with that person.

The deal was tentative, subject to approval by all state securities commissioners this spring. Some issues have not been resolved, because the committee of state regulators said it needed to consult its members. …