How much should you be able to learn about your stockbroker before signing on as a client? That's something about which the industry's enforcers are quarreling.
Plenty of information is on file in the Central Registration Depository (CRD). Stockbrokers have to report their histories for the past 10 years -- what firms they worked for, why they left, any military experience, self-employment, unemployment and full-time education.
Also reported are any black marks on the record -- gambling convictions, crimes involving money and securities, fraud, bankruptcies, unsatisfied judgments, violations of the rules of various regulatory bodies and exchanges, pending complaints and arbitration awards of $5,000 or more (or smaller, if the original claim was for $10,000 or more).
The vast majority of brokers have no disciplinary record, but you sure would want to know if your own broker did.
Similar information is recorded about the brokerage firm and its principals. These files have to be updated any time there's new information -- for example, if a broker is suspended for misconduct or switches firms.
To dish up all this dirt, you just have to tap the CRD, which is operated by the National Association of Securities Dealers (under the supervision of the Securities and Exchange Commission) and jointly owned with the North American Securities Administrators Association, an organization for officials who support state securities laws. These groups are at odds over what they should tell.
The NASD lets you peek at any final disciplinary actions, arbitration awards and criminal convictions. But it withholds all pending criminal lawsuits and regulatory investigations on the grounds that the broker hasn't been found guilty and might not be. Nor does it report judgments, bankruptcies or any civil lawsuits won against the broker. Why not? ''Judgments and bankruptcies are personal,'' says NASD spokesman Enno Hobbing. Not revealing civil lawsuits is ''policy.''
In NASAA's view, that's not a good enough answer. Potential clients should be able to find out whether a broker has a pattern of complaints against him, says Robert Lewis, deputy director of Virginia's Division of Securities and Retail Franchising. Learning about civil lawsuits, judgments and bankruptcies helps you ''make a better decision about whom to deal with and on what basis,'' he says.
Formerly, the NASD advised brokerage firms that they didn't have to report certain charges and pending actions. But last September, NASAA passed a resolution demanding that such information be included in the CRD and now it is.
But the NASD won't tell you about it. If you ask for information about your broker or brokerage firm, you'll get only criminal convictions, final regulatory actions, the broker's current job and his or her last job.
So don't ask the NASD. Ask your state. It will reveal the full contents of the CRD files. Most states give the most important information over the phone, and will follow up with a copy of the file -- usually free. For the telephone number of your state securities division, call the information operator in your state capital or ask NASAA at 1-800-942-9022.
Most people ask only for the disciplinary record, but you can also get the broker's employment history.
NASAA and the Securities and Exchange Commission are trying to settle their differences over what the public should be told. Let's hear it for NASAA's position.