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Company slams SEC as obstructionist
May 5, 2011 — 2:52 PM UTC by Lisa Shidler
Under fire for inaccuracies in the content of its massive new Advisor Pages database, BrightScope says it will allow advisors to make some basic changes in their listings for free. It has also used a blog post on its web site to sharply criticize the SEC and FINRA, saying that problems in the database stem from regulators’ deliberate moves to block public use of the government data.
“People weren’t attacking our data, they’re attacking the SEC’s,” said Ryan Alfred, co-founder of the La Jolla, Calif.,-based company, in an interview Both the SEC and FINRA refused to comment on BrightScope’s accusations.
The SEC comes in for plenty of criticism from advisors, but BrightScope’s criticism of the government’s database is new. That may be because no one has attempted to collect huge chunks of the data from it in the past for public posting.
The SEC’s website certainly allows consumers to access information about any SEC-registered investment advisory firm including the firm’s phone number, address, assets under management, types of clients and disciplinary action, says David G. Tittsworth, executive director of the Washington-based Investment Adviser Association.
“The Investment Adviser Registration Depository — the SEC’s database for investment advisers … (has) been up and running for more than a decade and provides a significant amount of information to anyone who has Internet access,” he says in an e-mail. “There’s rarely a day that goes by that I do not use IARD. I’ve always found it to be user-friendly.”
BrightScope’s new database contains public information about 430,000 advisors; for a $250 monthly subscription, advisory firms can add marketing information to their listings. See: BrightScope’s huge advisor database is first search-engine friendly way to connect consumers, advisors.
A storm of criticism has developed around BrightScope’s effort in the past week, with advisors saying the information is incomplete or doesn’t reflect their businesses; and BrightScope saying that it’s working fast to complete the database and that problems with the data stem from the bifurcated regulatory structure and advisors’ mistakes in filings. See: BrightScope sticks to its guns as it responds to outspoken critics of its Advisor Pages.
“What is shown is a disgrace in my opinion,” says advisor George Papadopoulos, a fee-only advisor in Novi, Mich., in an e-mail. “They really show nothing at all. They can not even get my designations to show correctly – CPA, PFS, CFP should be in caps of course.”
For BrightScope’s part, Alfred says that the company is trying to be quite responsive to advisors’ concerns and correct information promptly.
Alfred said in the blog posting that while BrightScope is not guaranteeing the accuracy of its information, it has not yet come across a case where information that is accurate on the SEC’s site is inaccurate on BrightScope’s.
“We were able to show that in the vast majority of cases the data integrity issues raised by the advisors were actually cases where the advisor was either unfamiliar with their own public filings or made a mistake in their filing,” Alfred wrote in the post.
Alfred says the company is working with more than 75 advisory firms to develop a methodology for describing assets under management and will allow advisors to update their assets under management for free. He says in the blog post that the company hopes to announce this new program in a few weeks. The information that Alfred says advisors can update for free would be basic facts such as their assets under management and client type. Advisors will still need to pay to items such as pictures and more details about themselves or the firm.
“We understand these concerns and are very sensitive to them,” Alfred says in blog post. “This is the type of fast action and responsiveness that the private market can support that can’t be matched by the government.”
In the blog post, he said that many advisors are upset about the AUM listed simply because they don’t agree with the government’s calculations. BrightScope also uses firm data rather than the individual advisor data, which it says can also lead to inaccuracies.
“We know that while their anger is addressed at us, the issue is really with the current SEC/FINRA disclosure regime from which we obtain our data.”
Regulators’ data blockades
“While the SEC claims to not ‘necessarily oppose the widespread dissemination of registration information’ it currently employs expensive private market solutions as counter-measures to prevent access to this public disclosure data,” Alfred wrote. “(It is worth noting that the collection, disclosure, and ‘defense’ of the disclosed data is paid for with taxpayer dollars.)”
Alfred says he hasn’t had conversations with the government officials but hopes to have detailed discussion with them in the near future.
Alfred says the SEC employs expensive private market solutions as counter-measures to prevent access to advisor data. For instance, he says if someone were to search for too many advisors on the site, that person would no longer be allowed access.
Likewise, it’s difficult for a company like his to collect large data because of filters from the SEC and FINRA.
“You can only use this data in one particular way and they’ll actively prevent you from using it any other way,” he says.
To avoid the SEC and FINRA hurdles, BrightScope often gathers its data from the states, which he concedes adds an extra layer of bureaucracy to getting this information. He says the company is also working on ways to reduce the lag time between filing and updating the pages.
Alfred says that if the SEC complies with the recent Presidential Memorandum on Regulatory Transparency the data may be easier to assess.
Information was also incorrect about Jennifer Cray, CFP of Investor’s Capital Management, LLC in Menlo Park, Calif.
“I took a look at my Brightscope entry a few days back, and it said I was dual registered. This is a major problem in that I am a fee-only planner and am not FINRA registered,” she says.
She said when she e-mailed the firm they told her that they’re working to add an active/inactive indicator for FINRA registration.
“I can’t believe they would launch the site without noting inactive FINRA registrations,” she says. But she points out that the company has corrected her information.
Meanwhile, advisor Donald L. Purtill, of Purtill Financial LLC with offices in Ohio and Florida, says virtually none of his information is even listed on the site. Currently, just the firm’s employees are listed, and the assets under management is blank.
“The government’s records are fine,” he says. “They have all of the right information and anyone can see it. There’s nothing inaccurate or incomplete about the government’s documents. The problem is they haven’t downloaded it completely.”
He says the ADV form showing his assets at $32 million is accurate. Alfred says the reason Purtill’s data is incomplete is because the data is still being loaded into the website.
He points out that he’s heard from many advisors who aren’t yet in the database. He says there are a lot of FINRA registered representatives who simply aren’t in the database, and they hope to fix that issue in the coming months.
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