FINRA tightens Central Registration Depository safeguards

    

THE U.S. Securities & Exchange Commission has approved FINRA's new rule for Central Registration Depository safeguards against any diversion of investor disputes away from registration.
The CRD process is designed to protect investors from rogue operators in the investment industry.
Investor clients should be able to access FINRA's BrokerCheck service to view all CRD information about a registered financial adviser or broker dealer ahead of making investment decisions.
Investment firms and advisors have increasingly diverted client disputes away from CRD registration in a process known as a conditioning settlement - with client compensation linked to the complaint being expunged from the CRD system.
The prevalence of conditioning settlements being linked to dispute resolution has distorted CRD safeguards for new investors, FINRA claim.
Richard Ketchum, FINRA Chairman and Chief Executive Officer, said, "This rule will prohibit firms and reps from conditioning settlements on a customer's agreement not to oppose expungement, thus protecting the integrity of the CRD system and disclosure of material information to investors."
Investor disputes logged by the CRD system help maintain client-dealer transparency by 'red flagging' issues when multiple investors register similar disputes against a named individual or investor firm.

Source: FINRA Newsroom

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