Were hiring some registered reps from a banks trust department. They dont have non-compete or non-solicitation clauses, but were concerned about privacy issues. Can they bring their client lists?
W. S., N.Y.
Regulation P of GrammLeachBliley governs privacy of non-public customer information for financial institutions. It defines nonpublic personal information as information not publicly available that was provided by a consumer to a financial institution, results from a transaction between a consumer and a financial institution, or that a financial institution otherwise obtains about a consumer. Information is publicly available if an institution reasonably believes its lawfully available to the general public. For example, information in a phone book or publicly recorded document such as a mortgage is considered public information. But there are special rules regarding lists. Publicly available information is treated as non-public if it is included in a list derived from non-public personal information. A list of names and addresses of a financial institutions depositors is non-public personal information because it pertains to people who have deposit accounts with the institution, which is not public. But if the relationships are a matter of public record, such as a list of mortgage customers whose mortgages are on public record, any list of these relationships is considered public.
So if the customer lists in question are non-public personal information, and if your new hires give you these lists, you could be found to be aiding and abetting, a violation of Reg P. If the bank notified clients that former employees might take the accounts with them and gave those clients an opportunity to opt out of that arrangement, the former employees could give you the list of clients who did not opt out. Otherwise, all you can do is send a generic mailing to everyone in the area or advertise in a local paper, hoping to attract your new reps former clients.
What are your thoughts on FINRAs response to the Public Investors Arbitration Bar Associations comments regarding release of brokers test scores?
R. D., Fla.
In February 2012, FINRA requested comments on ways to increase investors use of BrokerCheck, FINRAs public disclosure database where investors get information on brokers and brokerage firms. The request noted that the SEC had recommended that FINRA add broker exam scores to BrokerCheck. But at FINRAs conference that May, chairman and CEO Rick Ketchum said, Thats not the type of information were interested in disclosing. Then, on March 6, 2014, PIABA published its findings on certain aspects of BrokerCheck, including the absence of exam scores. Although the public can obtain a reps exam scores in some states, that data is not available everywhere. PIABA said the quality of the disclosure you get about brokers should not depend on which state you live in. FINRA responded by noting that BrokerCheck provides information regarding names and dates of all exams a broker passed and indicated that theres no evidence to support a correlation between test scores and broker competence.
While it appears FINRA is in no rush to release test scores, the SEC has often said information material to a clients decision to hire an investment adviser must be disclosed. And while a reps score may not correlate to ability, its likely the SEC will have the last say.
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