What Is BrokerCheck and How Do You Use It?

Andrew Lisa
Vadym Pastukh / iStock.com
Vadym Pastukh / iStock.com

If you’re thinking about investing your money, you’re probably researching the investments themselves — stocks, bonds, funds, REITs, etc. That’s certainly a good start. You want to become intimately familiar with the fees, performance histories and potential risks associated with any investment you’re considering — but where you intend to grow your money and with whom is just as important as how.

See: 5 Things You Must Do When Your Savings Reach $50,000

Only licensed professionals can execute trades, which means every time you invest, you’re trusting your money and your financial future to a person or firm you know very little about.

BrokerCheck is a powerful research tool that makes it easy to investigate the histories and qualifications of prospective brokers and financial advisors or those with whom you’re already working. It’s an important step in the vetting process — and one that could save you a whole lot of money and grief in the long run.

What Is BrokerCheck?

The Financial Industry Regulatory Authority is a not-for-profit organization — not a government agency — that serves as a self-regulatory organization for brokerage firms and exchange markets. By safeguarding the financial market’s integrity, FINRA protects both member brokerages and their investor clients.

FINRA’s most important tool is BrokerCheck, which anyone can use for free to get detailed reports on financial professionals or firms they want to learn more about.

Is BrokerCheck Legitimate?

Congress has authorized FINRA to protect investors by ensuring that the broker-dealer industry operates fairly, honestly and transparently.

According to FINRA, BrokerCheck “should be the first resource you turn to when choosing whether to start or continue doing business with a particular person or firm.”

Who Is Registered With FINRA?

FINRA oversees more than 624,000 brokers across the United States and uses machine learning and AI technology to analyze billions of daily market events.

How Do I Verify a Broker on BrokerCheck?

To verify a broker, visit brokercheck.finra.org and enter what you know about the person or firm you’re researching into the search fields.

A broker’s name is all you need to get started, but you can narrow down your options by including supplementary data like the broker’s location and the name of the brokerage firm that employs the broker.

What Will I Learn From a BrokerCheck Report?

BrokerCheck gives you a quick overview of a broker’s employment history, investment-related licensing information, and any regulatory actions, complaints or arbitrations. You’ll learn right away whether a person or firm is registered — as the law requires them to be — to sell securities, offer investment advice or both.

BrokerCheck provides several different kinds of reports depending on the person or firm you’re researching.

Brokers

BrokerCheck offers reports that detail brokers who are currently registered with FINRA or a national securities exchange or have been in the past 10 years. These reports include:

  • A summary of the broker’s history and credentials.

  • A broker qualifications section that outlines the individual’s current licenses, registrations and exams taken and passed, including the required Securities Industry Essentials exam.

  • A registration and employment history that lists registered securities firms where the broker is or has been registered, as well as 10 years of employment history both in and out of the securities industry. That includes military service, self-employment, full- and part-time work, full-time education and time spent unemployed.

  • Disclosures like disciplinary events, certain criminal and financial matters and customer disputes.

  • Any comments the broker submitted.

BrokerCheck also offers reports on current or former brokers whose registrations ended more than a decade ago. These reports similarly chronicle their careers and qualifications and generally feature the sections outlined above. However, a different set of criteria is used to determine whether an event is included in the disclosure section of this type of report.

Brokerage Firms

You can also get a BrokerCheck report on an entire firm, which includes:

  • A summary of the firm’s background and history.

  • A profile that details when the firm was established and which people and organizations control it.

  • A history of the firm’s mergers, acquisitions and name changes.

  • An operations section that outlines the firm’s active licenses and registrations and the types of business it conducts.

  • A disclosure section detailing any disciplinary events, arbitration awards or financial matters on the firm’s record.

Where Does the Information Come From?

The information you receive comes from the Central Registration Depository, which FINRA administers. The CRD contains all the information that brokers, brokerages and their regulators include on their licensing and registration forms.

Any information you receive about investment advisor firms and representatives comes from the Investment Adviser Registration Depository database, which is sponsored by the Securities and Exchange Commission.

In Closing

BrokerCheck is free and easy to use, which makes it the right place to start any potential relationship with a financial professional or to check up on those you might already be working with. To dig deeper, use FINRA’s other tools that complement BrokerCheck, including fund analyzers, arbitration and SEC action lookup tools and public alert databases.

This article originally appeared on GOBankingRates.com: What Is BrokerCheck and How Do You Use It?

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