Last week, the Securities Lawyer Blog posted on the enhanced BrokerCheck under Regulatory Notice 10-34. This week, we provide information regarding the dispute process for challenging the accuracy of information included on BrokerCheck®.
Beginning August 23, 2010, both individuals and firms will be subject to a formalized dispute process to challenge the accuracy of BrokerCheck® information. This will apply not only to information that was incorrect when first filed, but also applies to information that has become incorrect since the original filing.
Eligible Parties Only
The dispute process enables only an eligible party to challenge information on the service. An eligible party is essentially defined as a former member firm and "any associated person of a member firm or person formerly associated with a member firm for whom a BrokerCheck report is available." Former member firms can only dispute information through natural persons who were in the following functions at the firm: "Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Chief Legal Officer or Chief Compliance Officer, or individual with similar status or function, as identified on Schedule A of Form BD at the time the former member firm ceased being registered with FINRA."
Dispute Forms and FINRA Review
The FINRA website will include a BrokerCheck Dispute Form which is required to be used to dispute information. The form will allow eligible parties to pinpoint inaccurate information and to provide support for the claim of inaccuracy.
FINRA will determine whether the claim of inaccuracy warrants an investigation. "[T]he dispute must pertain only to factual information and not to information that is subjective in nature or a matter of interpretation." FINRA has provided a list deemed "non-exhaustive" to help members gauge disputes that will not be considered for investigation even though factual information is involved. These include disputes that:
(1) involve previously disputed facts with no submission of new information or new evidence;
(2) are filed by non-eligible parties;
(3) attempt to explain factual information, rather than challenge a BrokerCheck profile's accuracy;
(4) are merely collateral attacks on or otherwise challenges to "allegations underlying a previously reported matter such as a regulatory action, customer complaint, arbitration, civil litigation or termination;"
(5) consists of a general statement of inaccuracy without supporting explanations for the challenge; or,
(6) involve "information contained in CRD that is not disclosed through BrokerCheck."
After a dispute is filed, if FINRA finds that an investigation of the challenged information is not warranted, it will inform the person filing the dispute of this and will describe why it has reached this determination. This is not subject to appeal. On the other hand, if a dispute warrants investigation, FINRA will post a notation on the eligible party's report on the service that the party has disputed information and will remove this notation once the dispute is resolved.
FINRA will make requested changes if the Dispute Form and accompanying documentation are sufficient to warrant the change without further verification. Where necessary, FINRA will contact the reporting entity such as a firm, regulator or FINRA department, for verification that the information is accurate. It will defer to the reporting entity on accuracy and if that entity confirms the information is inaccurate, appropriate changes will be made. However, if the reporting entity states that the information is accurate, or the entity itself "no longer exists or is unable to verify the accuracy of the information, FINRA will not change the information."
FINRA will let eligible parties know the outcome of its investigation which cannot be appealed and will advise the disputing eligible party that:
(1) the information is either not accurate or was not accurately presented and is now updated, modified or deleted;
(2) the information is accurate in both content and presentation and did not warrant any changes; or,
(3) verification of the accuracy of the information or its presentation was not possible and no changes have been made.
If you have any questions concerning the dispute process for BrokerCheck or other FINRA matters, please contact New York's Gusrae Kaplan Nusbaum PLLC.
