We’ve told you in a prior post about BrokerCheck, FINRA’s portal to background information concerning brokerage firms and their registered representatives. FINRA provides information on brokers who are currently registered with FINRA or who have been registered within the last 10 years. A free summary report is delivered immediately online and provides:
- A listing of the broker’s qualifications, including current registrations or licenses and industry exams that the broker has passed;
- A list of the broker’s previous employers for the past 10 years, both in and outside the securities industry, as reported by the broker; and,
- A review of the customer disputes or regulatory and disciplinary events noted on the broker’s record.
BrokerCheck is a good place to start. You might see that a broker’s a nomad who switches firms every couple of years. Maybe he’s so good he just kept getting better offers, but more likely it indicates he’s been a problem for his employers and probably his customers. You might see that a broker has one customer complaint in 20 years and it didn’t concern fraud. That one strike might not be a disqualifier. But if you see many more complaints, you’ll know you should probably run.
Unfortunately, FINRA is pretty stingy when it comes to details. If you want to be reasonably sure that the person who’s handling your money isn’t a serial miscreant, you need to dig a little deeper.
We recommend that you contact the office of the securities regulator for your state of residence and ask for a complete CRD report on your broker. State regulators typically maintain the full CRD report, in contrast to the censored version available on BrokerCheck. You’ll get things like a longer chronological employment history and much more detailed information about complaints and court or disciplinary actions.
Hugh Berkson is a Securities Attorney with McCarthy, Lebit, Crystal & Liffman, Co. LPA. Hugh is rated AV® Preeminent™ by Martindale-Hubbell®.
He obtained a business degree in Finance from the University of Texas at Austin in 1989, and is a 1994 graduate of Case Western Reserve University School of Law, where he was a member of the Order of the Barristers and received both the American Jurisprudence Award, (National Mock Trial) in 1993 and the Jonathan M. Ault Mock Trial Prize for 1993-1994.