FINRA BrokerCheck: Check a Broker or Adviser Before You Send Money

The account paperwork is ready to sign. Someone has offered to manage your savings or sell you an investment, and before any money moves you should look them up on two free sites whose records come straight from regulators, which takes a few minutes and costs nothing.

Brokers: FINRA BrokerCheck

Brokerage firms and the representatives who work for them register with FINRA, the self-regulatory body that oversees broker-dealers in the US. FINRA publishes those records through BrokerCheck, a free search on its website. Type in a person’s name or a firm’s name.

A record for an individual shows whether they’re currently registered, which exams they’ve passed, the firms they’ve worked for and when, and a section of disclosures. A record for a firm shows its registration, its history and its own disclosures.

Check the person and the firm separately. A clean firm can employ someone with a long record. The reverse happens too.

Advisers: the SEC’s Investment Adviser Public Disclosure site

Investment advisers, the people and firms paid to give advice or manage money on an ongoing basis, register either with the SEC or with their state securities regulator, depending mostly on their size. Either way, the SEC’s Investment Adviser Public Disclosure site carries their filings.

The central document there is Form ADV. It describes what the adviser does, how it’s paid, the conflicts of interest it has and any disciplinary history, and the second part, a brochure written for clients, is the one to read before you sign, since it spells out fees and conflicts in language meant for you.

Plenty of people are registered as both a broker representative and an adviser. Search both sites.

Read the disclosures, not just the green light

The top of a BrokerCheck record tells you whether the person is registered. It’s easy to stop there. The part that matters is further down.

Disclosures can include customer complaints, arbitrations, regulatory actions, terminations by a former employer, criminal matters and certain financial events such as bankruptcies. Each entry has a date and a summary. Many also give the outcome or the representative’s response. Read them. A single old complaint that was denied reads very differently from several recent ones about the same kind of product, and a pattern of complaints about unsuitable recommendations or unauthorized trades is the kind of thing you want to know before you hand over control of an account, not after.

Look at the employment history as well. Frequent moves between firms have ordinary explanations. They can also follow terminations, which the disclosures section would show.

When something worries you, ask about it directly. A legitimate professional should be able to explain their record. You then decide whether the explanation holds up.

No record at all

If you can’t find someone on either site, pause everything. People who sell securities or give investment advice for pay generally have to be registered, and an unregistered person selling investments is a red flag in itself, whatever the product and however convincing the pitch. Check the spelling, try the firm’s name, and ask for their registration number. If a record still doesn’t turn up, don’t send money.

A record that exists but belongs to someone else is its own warning. Impersonators borrow the names of real, registered people. Contact the firm listed on BrokerCheck through the phone number or website you find yourself, and confirm the person works there.

State securities regulators

Every state has a securities regulator, and state regulators register many smaller advisers and keep their own records of complaints and actions. The North American Securities Administrators Association, the group that brings those regulators together, lists each one with its contact details. Your state regulator is also a place to ask about a person or product that doesn’t appear on the federal sites, and to report a problem.

What a clean record means

A clean record tells you the person is registered and nobody has filed a disclosure against them, and it says nothing about whether an investment they recommend is any good or whether their fees suit you. Registration is where checking starts.

Once you know who you’re dealing with, the next question is what happens to your holdings if the firm itself fails, and what SIPC covers answers that. The course overview for investor safeguards has the full sequence, and how to evaluate a stock covers judging the investments themselves once the account is in safe hands.