Investor Access to Broker Information: Room for Improvement

In the NASD website’s section on “Common Investor Problems and How to Avoid Them,” the NASD cautions investors to “Make an informed decision before agreeing to allow the broker to use discretion in buying or selling your investments”; and “Before you make an investment, be prepared, do your homework, and don’t be caught off-guard. Investigate thoroughly any potential investment before you make it, as well as the broker and securities firm that are recommending it to you.”

Typical investors, however, enter the relationship with their broker expecting honesty and trust aside from investment advice, services and products. The furthest thing from an investor’s mind is to conduct an investigation of a broker who is employed by a global financial services firm. Most investors are not even aware of the CRD and its potential usefulness in choosing a broker wisely. The CRD usually comes into play when investors have reason to file a claim against a broker in a securities arbitration, but by then it may be too late.

That’s why making meaningful information on securities industry firms and brokers accessible and easily obtainable should be a priority. We have long advocated that the SEC, the NASD and brokerage firms make the complete - and not just an abridged - CRD readily available to investors. A comprehensive CRD is readily available from state securities regulators, and can be obtained in a matter of days if not overnight by email from, for example, the office of the Florida Department of Banking and Finance. We have even proposed that the industry give customers a copy of their broker’s CRD at the same time that the customer opens a brokerage or other financial services account. These reforms are long overdue.