The vast majority of stockbrokers are honest and reputable, but just like with any profession, there are always a few bad eggs. How do you avoid getting stuck with one of the rotten ones? What’s the best way to check out brokers to make sure the one you trust with your money is trustworthy?
Start by contacting your state security regulator.
All state security regulators are members of the North American Securities Administrators Association (NASAA), whose primary goal is to protect investors from fraud and to license brokers and other investment professionals. They can give you lots of information on the broker’s employment, disciplinary, and registration records.
You can find your state security regulator’s contact information here.
Another useful tool is the BrokerCheck Program from the Financial Industry Regulatory Authority, also known as FINRA.
It gives you access to all sorts of valuable records:
- employment and disciplinary histories,
- listings of active licenses and registrations, and
- summary reports that provide details about the broker.
All of this info comes from the Central Registration Depository (CRD), an online database that stores all of the forms that brokers must submit when registering with FINRA.
If you’re feeling more old-fashioned, just call the toll-free BrokerCheck hotline at (800) 289-9999 and ask the representative to send you the BrokerCheck Report.
— Answer provided by Motley Fool intern Caroline Jennings