How Useful Is New BBB/Financial Industry Agency Oversight Site?

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December 13, 2012; Source: Wall Street Journal

If you have a complaint about the service or product you’re getting from a commercial company, you can complain to any of the 114 independent bureaus of the Better Business Bureau network. If you are concerned about the bona fides of a number of nonprofits, you might find helpful information from the BBB’s WiseGiving Alliance.

But where would you go for information about making the best possible choices in the stock market? The Financial Industry Regulatory Authority (FINRA) is the entity, but it isn’t very well known, to put it mildly, among small investors picking among the 4,000 securities firms out there. FINRA starts with an inherent credibility problem. It is not a governmental regulatory entity, but a non-governmental regulator for U.S. securities firms that handles complaints about brokers.

So FINRA, in an effort to be seen as a tool for investors, has joined its nonprofit arm, the Finra Education Foundation, with the Better Business Bureau to create the SmartInvesting website, with links to FINRA features such as FINRA’s BrokerCheck, which one can use to research the criminal and regulatory records of brokers. In linking up with the Better Business Bureau, FINRA can now take advantage of the BBB’s better name recognition and visibility. For the BBB, this might be the start into a new realm of activity, especially in light of how many brokers and dealers aren’t sitting on Wall Street, but are increasingly found on Main Street.

Nonetheless, SmartInvesting is a self-regulatory tool dependent on the willingness of consumers to deploy it and the openness of the securities industry to make sure the information is there to help investors of all kinds. Moreover, in this case, the BBB seems to be primarily helping investors get access to already-existing FINRA tools. Will this collaboration lead the BBB itself to consider the development of new tools and new monitoring of brokers and dealers separate from institutions, such as FINRA, that the industry has set up for itself?—Rick Cohen

CORRECTION: An earlier version of this article referred to FINRA as an “industry group.” NPQ regrets the error.