Investors curious about their brokers' backgrounds should be able to use home computers to examine the securities industry's data base of disciplinary records, a group of state regulators says.
Consumer activists this week hailed a proposal by the North American Securities Administrators Association, saying it would be a major boost for consumers seeking to get a fair shake in the securities markets.John R. Perkins, the chief state securities regulator for Missouri, plans to formally make the proposal at a congressional hearing scheduled Friday on problem brokers. The Associated Press obtained an advance copy of Perkins' testimony.
"Direct and uncensored public access to CRD disciplinary files would mean speedier access to critical information for investors and also would dramatically turn up the heat on problem brokers," said Perkins, who heads a task force on weeding out so-called rogue brokers.
The CRD, or Central Registration Depository, is a vast data base containing all enforcement records against the nation's 460,000 registered brokers and traders, as well as 5,500 securities firms. The records, some dating to the early 1950s, provide details of specific securities law violations, arbitration settlements, fines and lawsuits.
The CRD is run by the National Association of Securities Dealers, the industry's main self-regulatory body. The nation's stock and commodities exchanges, as well as state regulators, contribute to the system.
The public has only limited access to the records via a toll-free telephone number run by the NASD. The NASD says it receives about 1,750 calls a week on its toll-free information service.
The NASD is in the midst of a $12 million upgrade of the data base that would enable regulators to perform sophisticated surveillance and analysis of the records, which currently are in an outdated format that limits searching.
Perkins said the state regulators envision a day in which investors could use computers in their homes or in public libraries to download both the corporate filings and the disciplinary files to check on a firm or a broker's reputation.
The man who oversees the CRD system, Jay Cummings of the NASD in Rockville, Md., was caught by surprise by Perkins' proposal and declined to discuss it.
Although experts agree the CRD suffers from outdated technology, the data base remains a powerful research tool. Perkins is proposing the CRD files be made available on the global Internet computer network, in much the same way that the Securities and Exchange Commission's electronic corporate records are available via the Internet.
Jamie Love of the public interest group Taxpayer Assets Project said the idea sounded "extremely useful" for consumers.
"The opportunity to have on-line access to people who are pitching securities would be a huge benefit," said Love, who fought to have the Edgar files made available via the Internet.