How do I check out my stockbroker?
The easiest way to check out your broker is at www.brokercheck.com, which is a free database run by the Financial Industry Regulatory Authority (FINRA). FINRA is the non-profit entity, supervised by the U.S. Securities & Exchange Commission, responsible for regulating securities broker dealers that do business in the United States.
You can use ABroker Check@ to investigate the background of your broker or the brokerage firm.
When investigating a broker or a potential broker that you are considering, you want to review the following factors:
1. With which brokerage firm is the broker registered?
It is often confusing to figure out which securities brokerage firm is responsible for supervising your broker or potential broker. This is often the case when the broker runs an Aindependent@ office and is only affiliated with a firm as an independent contractor. Knowing the firm responsible for supervising the broker, including the firm’s disciplinary history, is important information to have in deciding whether to go with or stay with your broker.
2. Where is the broker registered to buy or sell securities?
If you live in Florida, for example, you want to check Broker Check to ensure your broker has a registration in Florida. Brokers often move around or do business in numerous states. You want to make sure your broker has the proper licensing in the state in which you reside.
3. The broker’s employment history.
Broker Check will reveal the broker’s employment history, including dates of registration and current employment. One red flag to look out for is a lot of turnover or changing brokerage firms by the broker. This often will show a broker who is not stable or one who may have had disciplinary or performance issues at a prior firm. When hiring a broker, you might consider asking for other customer references or a reference from a former supervisor.
4. The broker’s customer complaint and disciplinary history.
The most important thing to look at on Broker Check is the broker’s customer complaint and disciplinary history. Most complaints by prior customers are required to be disclosed on Broker Check, including ones that result in a FINRA arbitration proceeding. Broker Check also requires a description of the complaint and whether the complaint resulted in a financial settlement or recovery. Likewise, regulatory discipline against the broker also must be disclosed on Broker Check, including suspensions or regulatory sanctions that the broker incurred.
Please Note: Rabin Kammerer Johnson provides these FAQ’s for informational purposes only, and you should not interpret this information as legal advice. If you want advice as to how the law might apply to the specific facts and circumstances of your case, please contact one of our attorneys.