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Bad Broker Database Under Development

The SEC plans to create a searchable database of “individuals who have been barred or suspended as a result of federal securities law violations,” said SEC Chairman Jay Clayton before the Practising Law Institute’s 49th Annual Institute on Securities Regulation in New York last week.

He also noted that the agency “will continue to be active in pursuing cases where hidden or inappropriate fees are at issue” and that it is exploring whether more can be done to “clarify fee disclosures made to retail investors and, thereby, deter and reduce opportunities for misbehavior.” “Complex, obscure, or hidden fees and expenses that can harm investors” are a common narrative in the agency’s inspection and enforcement programs.

“Clearly, there are fraudsters in our marketplace who are seemingly unafraid of, or undeterred by, the risk of being caught,” said Clayton. “The SEC can target the underlying conduct of those fraudsters—and we do—but we also can and should arm investors with information that makes it more difficult for them to be defrauded.”

He also encouraged investors to “ask questions,” and that the agency will help them figure out the right question. “We remind investors repeatedly that they should conduct a background check before investing with a financial professional, and we are showing them how to do just that.”

FINRA’s BrokerCheck is a free tool that helps investors research the professional backgrounds of brokers and brokerage firms, as well as investment adviser firms and advisers.

The agency also offers an online database that provides the full text of arbitration awards issued by FINRA’s arbitrators and other forums, and a searchable database of FINRA’s disciplinary actions, which also includes opinions issued by the SEC and federal appellate courts.

The Investment Adviser Registration Depository system, sponsored by the SEC, the North American Securities Administrators Association and an industry advisory council, is designed to “create a regulatory system for investment advisers to improve overall regulation of advisers, make information about investment advisers available to the public, and provide investment advisers an efficient automated filing system.”

“A thoughtful approach to transparency can enhance both governance and investor protection. I am committed to increasing transparency about SEC operations, and we also are focused on transparency efforts that further the long-term interests of retail investors,” Clayton concluded.

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