(Dow Jones) Financial advisors with multiple blemishes on their records are finding it tougher to move from one broker-dealer to another these days.

Not all that long ago, the new firm might look past an advisor's "marks" (for, say, selling an unsuitable investment to a client) if they brought a healthy book of business and a talent for recruiting clients. But in the post-crisis world of both heightened litigation and increased regulatory scrutiny, that isn't happening as often.

"A lot of representatives with multiple marks are basically getting flushed out of the industry because broker-dealers are increasingly paranoid about bringing them on," says Jonathan Henschen of Henschen & Associates LLC, a Marine on St. Croix, Minn.-based recruiter.

Henschen said broker-dealers fear they'll face more frequent audits or other increased scrutiny from regulators if they hire representatives with troubled records. The firms also are less willing now than they were in the past to provide extra supervision to these advisors, he said.

Mindy Diamond, president of Chester, N.J.-based search firm Diamond Consultants, says, "We're living in a much more hyper-vigilant compliance culture where the appetite for advisors with marks (on their records) is much less than it has ever been before."

Diamond said broker-dealers are generally willing to meet with the more productive prospective hires with a few blemishes on their record, but the process may be halted at the compliance department. Largely, what happens depends on the nature of the complaints, whether they're similar and whether they're resolved, she said.

The 2008 downturn produced waves of lawsuits against advisors and brokerages from clients who blamed their losses on bad financial management. It also exposed some long-running investment frauds, including that of Bernard Madoff, as well as bungling by regulators who failed to uncover them. Now regulation has tightened and is pushing for more transparency in industry practices, which makes advisors' blemishes more visible.

"I've been in the business for 35 years and it's as litigious an environment as I've ever seen," says Larry Papike, president of Cross-Search, a Jamul, Calif., recruiting and executive search firm for independent broker-dealers.

Regulators recently expanded the BrokerCheck system that provides public access to advisor's records and where allegations of unsuitable sales, unauthorized transactions and other transgressions are posted. Late last month, the Financial Industry Regulatory Authority began adding for public viewing so-called historic complaints to Brokercheck--that is, customer complaints and certain legal actions more than two years old which haven't been concluded or settled for less than $15,000. Such complaints were previously available to the public on the system only if a broker was involved in three or more matters that required disclosure.

Customer complaints "now are just a couple of mouseclicks away from anybody on the planet seeing what's going on," says Papike. Broker-dealers are "running scared" when it comes to hiring an advisor whose records reflect run-ins with regulators or serious investor complaints, he says.

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