What you don't know can't hurt you? -- Gaps in FINRA's BrokerCheck.

A new study hot off the presses by the Public Investors Arbitration Bar Association (PIABA) raises tough questions about gaps in the Financial Regulatory Authority's BrokerCheck tool for checking the background and credentials of stock brokers and other licensed professionals in the scurities industry.

The PIABA report can be accessed on the organization's website here. The headline on PIABA's press release, "PIABA WARNING: FINRA WITHHOLDS CRITICAL 'RED FLAG' INFORMATION IN BROKER BACKGROUND CHECK DISCLOSURES TO INVESTORS."  The call to action, "It’s Time to Harmonize FINRA and State Disclosures to Public: FINRA’s BrokerCheck Routinely Deletes Information about Bankruptcies, Tax Liens, Firings, Flunked Tests, Sales Practice Abuse Investigations, and Other “Red Flags” for Investors."

The Wall Street Journal has picked up the story here as well, pointing out that its own reporting showed that more than 1,600 brokers' records don't show personal bankruptcies and criminal charges that should be reported.  Investment News published an article covering the story this afternoon here.

There are competing arguments as to how much information ought to be disclosed and whether certain information is actually useful to investors, but I fall in the camp that believes that more information is better.  But wherever you draw the line between privacy and the public's right to know the good the bad and the ugly about investment professionals . . . PIABA reports that state regulators in many jurisdictions make public information that FINRA choses to excise from its BrokerCheck system.  This would seem to undermine any privacy rationale behind FINRA's choice to release less information on BrokerCheck.  If information is available from state regulators is there any good reason not to make that same level of information available to the public through BrokerCheck?