According to a recent report in Investment News, Senator Edward Markey (D, Mass), penned a letter to FINRA and the SEC asserting that arbitrations and settlements should not be expunged from brokers' records, that many arbitration awards go unpaid, and that FINRA is not cracking down on rogue brokers who had previously worked at firms that have been expelled from the industry. You can read the letter here. Sen. Markey's letter cites to no specific examples of any problem, but references three recent WSJ articles from this month highlighting various issues in the regulation of the industry.
The Senator encourages FINRA to take additional steps to ensure that more meangingful disclosure of a broker's history is available for investors to see, and also to move forward with a rule requiring brokerage firms to carry insurance to cover arbitration awards. While these concepts sound appealing, they can certainly lead to unintended consequences, including negatively impacting the careers of brokers who are playing by the rules and doing right by their clients. This call for additional regulation on an already over-regulated indusstry should be closely monitored.