"One of the key challenges of initiating a review of this scope is balancing the need for investor protection and an investor's ability to make informed decisions with the legitimate privacy issues of individuals and proprietary issues of brokerage firms," said Robert R. Glauber, Chairman and CEO of NASD. "The information that we provide the public, especially to investors, is absolutely critical for their investment decisions. The goal of this review is to enhance investor protection without sacrificing the effectiveness of NASD's regulatory mission."
NASD is proposing increasing and enhancing information provided by the Public Disclosure Program in the following areas:
- Increased Public Information from the CRD® System. NASD is proposing that more Central Registration Depository (CRD) information be made publicly available. NASD draws information for its Public Disclosure Program from the CRD system, a registration and licensing database used by regulators throughout the securities industry to register, license and regulate securities firms and their brokers.
NASD is proposing that all U-4 forms filed electronically through the CRD system be made publicly available, including all answers to disclosure questions and any disclosure events reported on the filings. Those previously filed in hardcopy would be available upon request. A Form U-4 captures a host of administrative and disclosure information for individual registered representatives and is filed by their firm while they are currently registered. Although NASD proposes making all U-4 filings publicly available, NASD will continue its practice of not releasing certain personal information which could lead to identity theft such as a broker's social security number, home address, date of birth, and physical description. Currently, after a broker leaves the industry, disclosures that are filed through the CRD system via Form U-5 by his or her previous firm are not publicly available until the broker re-registers and has the opportunity to respond. NASD is interested in establishing a mechanism that would enable these to be disclosed prior to re-registration, possibly by enabling the former registered individual respond to them via a filing with NASD or a uniform filing through the CRD system.
NASD is also considering expanding the firm information by disclosing virtually all of the information reported on Form BD, including officers and direct and indirect owners of brokerage firms along with previous names of the firm, branch office information and clearing firm information. Additionally, a member firm's original Form BD application, the initial regulatory information required for each member firm, would also be made available along with regulatory filings as for individuals.
- Automatic Public Disclosure Updates. NASD is interested in alerting investors to key changes in available information about a broker or firm. This would allow an investor or other user of the Public Disclosure Program to request an email notice when the information previously provided to them changes.
- Putting the Information in Context. NASD is considering expanding information available through the Public Disclosure Program to include certain comparative information that would help an investor better understand and evaluate the information on a specific broker or firm. This would enable the interested party to understand how his or her broker or firm compares, relatively, with the rest of the industry.
NASD is considering the implementation of additional safeguards to ensure the timely reporting of disclosure information to the CRD system. In addition to existing checks and balances, NASD is proposing to increase regulatory staff review of sources of information other than the CRD system (e.g., arbitration claims filed with NASD Dispute Resolution), impose late disclosure filing fees and require all brokers who have not yet filed a Form U-4 amendment electronically through the CRD system to do so. NASD also is looking at establishing a mechanism for investors, attorneys or others to report instances where they believe that a disclosure event has not been reported to the CRD system. Improving the ease of access to arbitration awards is another area under scrutiny at this time. NASD is considering changes to make it easier for investors and others to navigate the database of awards and to provide additional ways to search the database.
NASD is the leading private-sector provider of financial regulatory services, dedicated to bringing integrity to the markets and confidence to investors through effective and efficient regulation and complementary compliance and technology-based services. NASD touches virtually every aspect of the securities business - from registering and educating all industry participants, to examining securities firms, enforcing both NASD rules and the federal securities laws, and administering the largest dispute resolution forum for investors and members firms. For more information, please visit our Web Site.
