(Corrects 9th and 10th paragraph to clarify that Dobin has been approached by grandfathers with legal problems from their youth, such as shoplifting. He has not represented a grandfather with a shoplifting violation.)

Reuters (March 6, 2014 10:06 am) -- A disclosure system that Wall Street's watchdog promotes as a tool for researching brokers lacks crucial details, a group of consumer lawyers says it will reveal in an analysis on Thursday.

The analysis will raise questions about whether the BrokerCheck service, run by the Financial Industry Regulatory Authority (FINRA), gives investors all the information they need to make an informed decision about choosing a broker. The study is being released by the Public Investors Arbitration Bar Association (PIABA), a group of attorneys who represent investors in securities arbitration cases.

FINRA does not go as far as state securities regulators do in some of its disclosures, the group says.

For example, BrokerCheck does not typically disclose specific reasons why a broker was fired, or bankruptcies from more than 10 years ago, PIABA says, although those items would turn up in state disclosures.

FINRA and state securities regulators have access to the same information: It is included in a huge database on brokers and brokerage firms maintained by FINRA and used by the states, the industry and other regulators. FINRA, though, doesn't include all of the details in BrokerCheck, PIABA said.

The report will highlight an issue that divides securities brokers and lawyers who represent investors: How much of a broker's past should the regulator publicize? The best answer requires a delicate balance between investors' right to know about significant past transgressions and the broker's concerns that old and minor issues could unfairly damage their reputations.

For example, the BrokerCheck file features items such as a broker's licenses and details about arbitration complaints that investors file to recoup money they say they're owed. It doesn't include items like test scores on licensing exams, or whether a broker paid off a tax lien.

The report is being issued as deeper problems with FINRA's disclosure BrokerCheck were brought to light. A Wall Street Journal investigation published late Wednesday found that the public records of some 1,600 brokers failed to include criminal charges, bankruptcy filings and other problematic issues that should have been in their files. (link.reuters.com/dak47v)

Some lawyers for brokers think the system already discloses more information than it should. Not all of it helps investors and it can cast a pall over the broker, said Marc Dobin, a lawyer in Jupiter, Florida, who represents brokers.

"Sometimes we get approached about grandfathers with shoplifting problems from when they were 19 in college pranks," Dobin said.

"That 65-year-old grandfather is not the 19-year-old kid who wasn't thinking straight," Dobin said.

PIABA, in a call with reporters on Thursday, will focus on differences between BrokerCheck and the larger database, called the Central Registration Depository, or CRD. It includes a broad range of information that firms, brokers and regulators report, such as when a broker leaves a firm or pleads guilty to driving while intoxicated.

FINRA uses substantial information from that database in its BrokerCheck system, but not every detail. The regulator has consistently encouraged investors to use BrokerCheck and consult their state securities regulator before choosing an investment professional, a FINRA spokesman said. In addition to BrokerCheck, FINRA provides website links to state securities regulators' websites.

FOCUS ON FLORIDA

To be sure, FINRA in recent years has broadened the types of information available to the public on BrokerCheck and made it easier to use the disclosure system. In 2010, it added details such as arbitration complaints and lawsuits against brokers dating back to 1999. Previously, a broker had to rack up three or more such actions before they appeared.

Even brokers who leave the industry will find their information permanently available in the system. Before 1999, it used to disappear after two years.

Dogged investors can access the data on the broader database that regulators use, but it takes some effort: The clunky process typically involves sending a written request to the state's securities regulator, in a format required by the state's open records law.

States with robust open records laws, such as Florida, will often respond with a report that can include more details than those in BrokerCheck. For example, a report from Florida would include the specific reason for a broker's termination, according to a spokeswoman for the Florida Office of Financial Regulation. A BrokerCheck report, in contrast, mentions the word "terminated," but without providing details.

Florida reports may include the broker's history of bankruptcy filings, while BrokerCheck includes those filed during the previous 10 years. Other Florida report details include whether a broker passed or failed an exam and his score, the Florida Office of Financial Regulation said. BrokerCheck, in contrast, lists only exams that the broker passed.

A SECOND LOOK

PIABA's analysis will not be the first look at differences between BrokerCheck and the larger database that regulators use. The U.S. Securities and Exchange Commission's staff studied the issue in 2011, as required by the Dodd-Frank financial regulation reform law.

That study recommended that the SEC staff and FINRA look into whether it is feasible for BrokerCheck to include all of the information from the larger regulatory database.

Since then, the SEC approved several FINRA proposals that broadened disclosures, including one that adds details about brokers who settled investment-related civil cases with state and foreign regulators.

More disclosure, however, is not always the solution that investors need, said Barbara Roper, investor protection director for the Consumer Federation of America, an advocacy group.

"Investors get so lost in the details that they fail to capture the most important information," said Roper, who has not yet seen the PIABA report.

Those major details include the broker's history of regulatory problems, orders to pay securities arbitration awards to investors and large numbers of complaints for sales practice abuses, Roper said.

The question for regulators to answer, she said, is whether they are doing a good job of presenting information that highlights what's important to the investor. (Reporting by Suzanne Barlyn; Editing by Linda Stern and Jan Paschal)