InvestmentNews (April 18, 2005 11:01 pm) -- The House of Representatives for the third time has passed legislation that would allow investors to get information over the Internet about brokers' disciplinary histories.

The House gave unanimous approval April 6 to the Realtime Investor Protection Act, sponsored by Rep. John Shadegg, R-Ariz.

The House approved similar legislation twice in the last Congress, and the bill is now expected to be taken up by the Senate.

The bill gives Washington-based NASD the authority to put its BrokerCheck data about brokers' disciplinary histories online.

Currently, the association isn't allowed to post that information online.

NASD has called for the legislation for more than two years. Marcia Asquity, vice president of government relations for NASD, said that the bill would allow investors who want a report on a broker to bypass requesting that the report be e-mailed to them, as is currently required.

If the bill is enacted, "you would not have to go through the e-mail check," she said.

"You get the broker's name, click on it, and the information would be right there."

Support from SIA

Most investors are used to getting information over the Internet, Ms. Asquity noted. NASD expects to be able to tailor the system online so that investors could get the information they want, rather than a voluminous document that could be overwhelming.

Ms. Asquity said NASD would add links to explain legal terms investors may not understand, such as "churning."

The association would also be expected to add information to the site in order to give customers information in context, including comparative information about how many brokers have complaints against them.

"People want to know what this information means," Ms. Asquity said.

Dan Michaelis, a spokesman in the Washington headquarters of the Securities Industry Association, which is also based in New York, said the brokerage group "strongly supports anything that provides disclosure of information to investors and makes that information more accessible."

However, he said, "we continue to have concerns about the listing process itself and making sure that all the information posted therein is accurate and up to date."

Brokers argue that complaints that are never found to be true could be filed against them.

Brokers can include their own responses to complaints that haven't been adjudicated in the BrokerCheck system, which is the publicly available portion of NASD's central registration depository database on brokers.

Problems need addressing

Rosemary Shockman, president of the Public Investors Arbitration Bar Association, said that Norman, Okla.-based organization representing plaintiff's attorneys "is in favor of providing investors with more information on the background of brokers."

But Ms. Shockman, a lawyer who operates an eponymous firm in Scottsdale, Ariz., said there are other problems with the NASD's CRD system that need to be addressed.

"The broker-dealers are putting forth much greater effort than they have in the past to protect the CRD record of the registered representatives," she said.

"Some firms will ask as a condition of engaging in settlement negotiations that the investor dismiss the registered representative if he has been named as a party," Ms. Shockman said.

She said Morgan Stanley of New York is asking that a broker be dismissed in a case she is handling, as a condition to engaging in mediation.

"This is happening on a broad basis," Ms. Shockman added. "I'm seeing it from other lawyers as well."

Morgan Stanley declined to comment on the case.