Before you hire a babysitter or a new employee, you probably do a quick check on them. With the Internet, it’s easier than ever to pull up information on people with whom you do business in your daily life. Yet many people pick a stockbroker or financial advisor without ever doing a basic check to find out if they have a criminal record or history of investment mismanagement.
Stockbrokers are regulated by a federal agency, the Financial Industry Regulatory Agency, or FINRA. One of the tools offered by FINRA is BrokerCheck, a free online service that allows you to take a look at your broker’s disclosures, employment history, licenses, customer complaints, and more. Every investor should search this database before hiring a stockbroker or deciding whether to continue a relationship with their broker. Similarly, investment advisors registered with the SEC have the same sort of information publicly available for free through the SEC’s Investment Adviser Public Disclosure online service.
Hugh Berkson is an advocate for investors who have been harmed by stockbrokers, investment advisors, insurance agents, and other investment professionals. If you have been harmed by hedge fund abuse, misrepresentation, fraud, or another type of misconduct, our Stock Market Loss team will fight to help you get full compensation for your losses.
Check Your Broker’s Disclosures
The first step for any investor should be FINRA’s BrokerCheck for brokers, and the SEC’s IAPD for investment advisors. Enter your financial advisor’s name or Central Registration Depository (CRD) number into the search tool; you can also add in their firm name and the city and state where they are located to narrow down your search results.
When you click on your advisor’s name, you will be presented with their name, license number (CRD), their years of experience, employment history, the number of state licenses that they hold, and the exams that they have passed. This is all-important information – but perhaps not as critical as the “disclosures” section. A disclosure is essentially a record of issues that they were involved in, such as customer complaints, arbitrations, regulatory actions, employment terminations, bankruptcy filings, and certain civil or criminal proceedings.
Example BrokerCheck results:
Ideally, your stockbroker will have zero disclosures. However, if they do have any disclosures, it is a major red flag. Click on the disclosures tab to learn more about what may have occurred.
For example, if your advisor has 1 disclosure that involves a customer dispute, the FINRA and SEC sites will list the nature of the dispute, the amount requested in damages, and how the matter was resolved. If there was a regulatory action against the broker, it will list the allegations against them, resolution, sanctions, and a link to the disciplinary action details. If your financial advisor has previously been terminated from a job in the financial industry, it will list the firm name, termination type, and allegations that led to the termination.
The information on regulators’ websites are based on the forms that brokers, brokerage firms, and regulators complete to be registered and licensed through FINRA. While BrokerCheck and IAPD are easy to use and comprehensive, you can also ask your stockbroker for a copy of their U4, which shows the same information. Your investment advisor should also have given you a copy of their Form ADV, which also contains that same information.
In addition to checking your financial advisor’s disclosures, you can also check their firm’s registration. BrokerCheck and IAPD will provide you with the firm’s registration status, company type, its licenses and registration, and disclosures. You can then click on the link to obtain a detailed report on the firm profile, history, operations, and disclosure events (if any).
Check If Your Broker Has Been Banned
After running a search on BrokerCheck, take a moment to review FINRA’s list of banned brokers. If a broker is on this list, then they have a FINRA bar in place. This means that FINRA has permanently prohibited them from associating with any member in any capacity.
The banned broker list includes individuals who were associated with a FINRA registered firm after the launch of FINRA’s web-based CRD on August 16, 1999. Only those brokers who have been barred in a final FINRA action will appear on the list.
If your broker is subject to a FINRA Bar, it will show up at the top of their BrokerCheck report:
You can then click on “disclosures” to learn more about what occurred to lead to the FINRA ban. If a broker does not have a BrokerCheck record, then you can find a record of the bar in the FINRA Monthly Disciplinary Action report.
Concerned About Broker Misconduct? Give Us a Call.
Whether you’re in the market for a new stockbroker, investment advisor, or simply want to check up on your current broker, FINRA’s BrokerCheck and SEC”s IAPD databases are a great place to start. If your financial advisor has any disclosures, it may be worth taking a closer look at how they are managing your account – or finding a new stockbroker.
If you believe that your stockbroker or financial advisor has engaged in some type of misconduct, give our law firm a call. Based in Cleveland, Hugh Berkson is dedicated to fighting for the rights of investors throughout the United States. To learn more or to schedule a free consultation with a broker misconduct attorney, reach out today at 866-932-1295 or fill out our online contact form.
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.