Monday, June 1, 2015

FINRA Admits Broker Check Being Used for Fraud

I have been warning brokers for years about the dangers of Broker Check. Not only is there an issue about reporting unproven, unverified and unsworn allegations by disgruntled customers, employers and ex-lovers, there is far too much information at FINRA's Broker Check about individual brokers which is available to anyone with Internet access.

My concerns were for fairness to brokers, and the obvious privacy issues. I raised similar issues about the now abandoned CARDS proposal, where FINRA wanted to maintain full detail information about every trade in every account in the world. The obvious privacy issues seemingly evaded FINRA's comprehension, until commentators, and the SEC, pointed them out. See, SEC Commissioner Agrees, FINRA's CARDS Proposal Is Nuts and FINRA Kills Cards.

Now there is a new issue, this time with Broker Check. In its most recent Investor Alert, FINRA admits that it is aware of more than 50 legitimate U.S. securities firms and individual brokers whose identities have been hijacked by scammers to create an appearance of legitimacy. Scammers are using the information on Broker Check to pose as actual brokers, to scam unsuspecting investors.

And what is FINRA doing about it? Not much, except to continue to attempt to increase the information on Broker Check, and to make the problem worse.

For more information - Well-Traveled Fraud—Advance-Fee Scams Target Non-U.S. Investors Using Fake Regulator Websites and False Broker Identities |

The attorneys at Sallah Astarita & Cox include veteran securities litigators and former SEC Enforcement Attorneys. We have decades of experience in securities litigation matters, including the defense of enforcement actions and representation of investors, financial professionals and investment firms, nationwide. For more information call 212-509-6544 or send an email.