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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 advisers, 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 advisers 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 advisers 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 are pushing for more transparency in industry practices, which makes advisers’ 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 adviser’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 adviser whose records reflect run-ins with regulators or serious investor complaints, he says.

A Finra spokeswoman had no comment for this story. Raymond James Financial Inc. (RJF) also declined to comment and Ameriprise Financial Inc. (AMP); LPL Financial Corp.; Stifel, Nicolaus & Co. (SF); and Waddell & Reed Financial Inc. (WDR) didn’t return calls.

Advisers sometimes feel they are put on the hook for company practices. Papike says he has heard from advisers who sold private placement offerings that were approved by their firms and now face customer complaints. They now want to seek new jobs, but Papike has advised them to stay until the complaints are resolved. Another broker-dealer won’t want to hire them and deal with the legal headaches, he says.

Papike says he’s dealt with several cases in which a broker-dealer has been asked to leave his firm due to production issues, and has several marks on his record. “I say, ‘It’s probably time for you to be looking for another profession.'”

(Daisy Maxey is a Wealth Adviser columnist who writes about matters of interest to advisers, including hedge funds, annuities, closed-end funds and new trends in mutual funds. She can be reached at 212-416-2237 or at daisy.maxey@dowjones.com)