Forbes (March 13, 2014 9:30 am) -- You’d think investors are well protected from the financial shenanigans, incompetency and outright money grabs of the stray—and straying—investment representative. After all, the Securities and Exchange Commission, the Financial Industry Regulatory Authority (Finra) and sundry state financial regulators all have some degree of oversight in this area.

But, according to a recent analysis from The Wall Street Journal, you would think wrong in the case of some 1,600 stockbrokers. The article cites bankruptcies, criminal charges, tax liens and other no-no’s that should show up both in these brokers’ reports and, in some cases, disqualify them for doing business for at least a period of time.

And, according to a new study by the Public Investors Arbitration Bar Association (PIABA), Finra doesn’t give investors enough information to begin with about potential advisors and events that may not reflect favorably on them.

How can these and other violations fall through the cracks? Because the cracks are earthquake-sized schisms, dependent on self-reporting and differences in state public information laws.

Self-Reporting Holes

First things first. Finra has a disclosure section for most brokers that includes information about customer disputes, disciplinary events and financial matters on the broker’s record. This regulatory authority lists each incident as reported by securities regulators, the individual broker and any involved firms.

While Finra urges readers to understand some items involve pending actions or allegations that have not been resolved or proven, it doesn’t say that the information on BrokerCheck is only as good as the information that is self-reported.

Theoretically, investment firms are responsible for reporting failures, which may be understandable when it happens to overworked, smaller firms. But reporting failures extend to even the largest firms.

According to Finra, Merrill Lynch was fined $500,000 in September 2012 for failing to file or timely file more than 650 required reports, including customer complaints and customer settlements, from 2007 to 2011. And that’s not all. For a six-year period through 2011, the company didn’t report or timely report customer complaints, and related Forms U4 and Forms U5, between 23 percent and 63 percent of the time

I have clients and friends who swear that my ranting has nothing to do with the big boys, of which the venerable Merrill Lynch is among the biggest. I’m not picking on Merrill. They’re far from alone. But It shows, again, how easy it is for misdeeds and malfeasance to slip through the cracks, where investors can take a nasty fall from the spillage. It doesn’t matter whether brokers work for mega-firms or the little guys—the potential greed will get the best of a few. It always does.

Fixing The System

A coordinated way of getting information that matters about advisors and brokers would help. But according to the PIABA report, Finra releases only a small portion of the information contained in the Central Registration Depository (CRD), a national database covering broker-dealer firms and stockbrokers.

The study’s title is all you need to know about the contents of this report: “The Inequality of Investor Access to Information; A Study Conducted By Public Investors Arbitration Bar Association Demonstrating How FINRA BrokerCheck Reports Omit Critical Information That Harms The Investing Public And Proposing Needed Federal Legislative Change.”

Essentially, PIABA—an organization of attorneys representing investors in securities’ arbitration cases, calls for Finra to adopt a standardized approach to reporting, based on the most detailed state reporting requirements. Currently, states offer differing amounts of CRD information, based on public information and sunshine laws. Expect the battle to continue on this front, leaving investors still waiting for a comprehensive solution.

Get Help

So how do you identify a wolf in sheep’s clothing if the industry’s various regulatory organizations can’t—or won’t— get together to guarantee the veracity of your investment representative? First, realize Finra’s information is only as good as what it gets. The information you get, on the other hand, is a different story.

You should expect full and transparent information. In lieu of digging through multiple databases to find the information that is supposed to protect investors, work with an organization that can help you dig through the mountains of data. That firm should provide expert due diligence in helping you find a new advisor or evaluate a current advisor. Not finding important details about your advisor can compromise your investments.

Ideally, I would work with a company that doesn’t accept money for advisor or investment firm listings. Although firms like these depend on results to stay in business, why open up even a sliver of a chance that a financial conflict of interest could affect your search?

Another plus would be a firm that works with a comprehensive and experienced investigation arm. As constant headlines continue to remind us, you often don’t learn misdeeds until after the damage is done. Do everything possible to find trouble before it finds you—and then avoid it.