This is Your Life – Your FINRA CRD

CRD, Your Permanent Record, and Your Future

By Mark J. Astarita, Esq.

When you were young and in high school, a big threat from administrators and teachers was that your latest transgression was going to be “part of your permanent record”, a mysterious document that followed you around for the rest of your life, would keep you our of the best schools, and unqualified for the best jobs.

You never saw that permanent record, and whatever was recorded in it probably did not have too much affect on your life. Now that you are in the securities industry, you have another permanent record – your CRD Report. And unlike your high school record, this permanent record can be seen by you, your customers, your competitors, and even criminals.

Brokers are by now painfully aware of the damage that can be caused to them and their reputations by their own CRD Reports. Because of the agreements between the states and the NASD regarding the creation and use of the CRD system, once a discloseable event is recorded in CRD, it is disclosed, forever, to anyone who asks to see the report.

Until recently, while the permanency of the record was an issue, the disclosure requirement was not, since the reports were seen only by regulators and prospective employers. Then the NASD began making the reports available, in redacted form, to potential customers of a broker. That program expanded to making the redacted form of the report available to anyone who called a toll free number – customers, potential customers, lawyers, and the merely curious – like your nosy neighbor.

In March, the public disclosure campaign expanded, in the name of “informing the public”, and your CRD Report, again in redacted form, became part of the great information superhighway, available on the Internet, to anyone with a computer.

The combination of extremely overinclusive reporting requirements – which includes a report of every written complaint letter ever written by a customer – and complete disclosure of those reports is an obvious issue, and one that has been addressed in this, and other publications. But there are two new twists on the disclosure that are increasing the problem.

The first is the disclosure that is being made off of the Internet, by some State Regulators. Every state which participates in the CRD Program has the ability to provide a full and complete CRD Report to the public. Most states will provide a redacted copy of the report, showing resolved disciplinary proceedings, and the brokers work history, to its residents who make a request for the report.
But some states, either because of a lack of funds, or a lack of care, are providing a complete CRD Report, without any redactions whatsoever, to anyone who requests it. The difference is significant, since a complete CRD report contains not only your name, your current home address, and detail of pending and resolved complaints against you, all of which are arguably relevant information for a potential investor. A complete CRD report also contains your past home addresses, your birth date, reported events that are not discloseable, and your social security number. Yes, your social security number.

It seems that everyone but the NASD and the States are aware of the huge potential for fraud when an unscrupulous person obtains that level of detail regarding another person. With a date of birth, an employment and address history, and a social security number, not only can one obtain the credit reports of the subject, one can obtain a wealth of private information, and can even apply for credit cards, using the subject’s name. Not a comforting thought to know that such information is readily available to the general public, simply for the asking.

The second twist is the Internet access to the CRD report, and the NASD’s attempt to shield some information from public. The Internet site will provide an employment history, and a list of the states in which the broker is registered, but not the details on any “disciplinary history”. Not providing the details should be a good thing, but the NASD has made it worse.

If a broker does not have any “disciplinary history”, the report indicates “Disclosure Events: No”. If the broker has 1, or 100 “disclosure events” (which term includes a customer complaint letter), the report states “Disclosure information may exist”, making the broker with one customer complaint letter look, at least on this screen, the same as a broker whose license has been suspended, or the broker who has 20 customer arbitration awards for unauthorized trading.

Following the disclosure event link makes the situation worse, because the next piece of information that the customer sees is the following statement:

Types of Disclosure information include, but are not limited to: criminal events (e.g., felony convictions, certain misdemeanor charges and convictions, such as theft of money, bribery, etc.) financial disclosure events (e.g., bankruptcies, unsatisfied judgments and liens), regulatory actions (e.g., suspensions, bars), customer complaints, and civil judicial events (e.g., injunctions).    The average reader’s probable reaction – this broker probably has a criminal history, or unsatisfied judgments against him, or has been suspended or enjoined. Would you trust such a person with control over your life’s savings?

In fairness, the complete information is available through the site, and in 10 to 14 days the party seeking the information will know whether the event is a simple one time customer complaint, or a series of serious events. But how many customers are going to fill out the form, and wait two weeks to make a determination, having already read that their potential broker is either a criminal, or a deadbeat? Not many, and most will simply find another broker.

If CRD reporting was accurate and fair, this would not be an issue. The NASD’s position that a customer should know information regarding his financial professional is not unreasonable. However, making brokers with a customer complaint, or even an arbitration proceeding, look like a criminal is not only unfair to the broker, it is unfair to the customer, who may avoid a potentially successful professional relationship.

What can you do about this? Get a copy of your own CRD Report. My informal survey of the site reflects that a fair number of those reports are inaccurate. Review the report, and take the time to make sure that it is accurate and complete. I found one Internet version of a CRD report that reflected that a broker was fired from his firm for failing to cooperate in an investigation. The same report does not reflect that the broker sued the firm over the termination, and received a significant award against the firm, for that termination. It is bad enough that he has to carry that termination event on his CRD Report, but leaving out the subsequent award against the firm gives an entirely incorrect, and harmful, view of the broker. You can also join the National Association of Investment Professionals, and attempt to lobby for a change to this process, and certainly to the disclosures being made by the States.

The true shame in all of this is that it would be a simple matter for all States to redact social security numbers, home addresses, and non-disclosure events, as many States do. And it would be even simpler for the NASD to add a disclaimer at the “disclosure events” information, that the disclosure event may be something as simple as one isolated customer complaint letter in a long and legitimate professional life.

But the NASD does not make such a disclosure, and some States find it easier to release personal information. After all, brokers do not complain, and do not support their own trade associations. The theory must be, if the brokers are not concerned, why should we be.

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Mark J. Astarita, Esq., is a securities attorney and partner in the law firm of Beam & Astarita, LLC. Mr. Astarita represents securities professionals in enforcement, litigation and arbitration matters and can be reached at or by email at astarita@seclaw.com. This article originally appeared in the August 1998 edition of Research Magazine.


Nothing herein is intended as legal or financial advice. The law is different in different jurisdictions, and the facts of a particular matter can change the application of the law. Please consult an attorney or your financial advisor before acting upon the information contained in this article. SECLaw.com was created by and is sponsored by Mark J. Astarita, Esq., a securities attorney and partner in the law firm of Beam & Astarita, LLC, who represents financial professionals in a wide variety of matters. Mr. Astarita can be contacted by email at astarita@beamlaw.com.

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