FINRA (Financial Industry Regulatory Agency) regulates 4,435 broker/dealers, 161,450 branch offices, and 630,155 registered representatives (reps) who hold active securities licenses (Series 6, Series 7, etc.).
Who Controls FINRA?
FINRA is a Self Regulatory Organization. The board of governors is comprised of senior executives from the financial services industry and members of the public. To a very large extent the industry regulates itself.
What is a FINRA Ombudsman
The Ombudsman’s Office provides a neutral and confidential forum for investors who interact with FINRA to voice their concerns about operations, enforcement, FINRA activities or FINRA staff. Individuals who are unsure of the proper channel for addressing a concern or feel that the issue cannot be resolved through other channels should contact the Ombudsman’s Office.
Go to: www.FINRA.org /Office of the Ombudsman for contact information (email, telephone, mail).
What is BrokerCheck?
This service enables investors to review the compliance history of financial advisors who have active and previously active securities licenses. There is a ten year limitation for previously active.
How do I Access BrokerCheck?
Go to http://brokercheck.finra.org/Support/TermsAndConditions.aspx. The next step is agreeing to FINRA’s Terms & Conditions.
Individual of Firm
You can look at the compliance records of individuals (brokers) or firms (broker/dealers). Select which ever is apppropriate to your needs.
Name or CRD Number
Enter the representative’s first and last name. Common names can produce confusing results. You will be shown a list of legal names based on the name you input into the BrokerCheck system. You must know the representative’s legal name.
A simpler solution is to ask the representative for his or her CRD (Central Registry Depository) number. This number is a unique identifier for representatives. This way you are sure you are reviewing the records of the right representative.
Current Employing Brokerage Firm
The system will display the name of the firm that holds the representative’s current securities licenses. It also displays the firm’s CRD number. You may want to research the firm that holds the licenses of this representative.
Not FINRA Registered
If the advisor is no longer licensed by a brokerage firm the system will display “Not FINRA registered since month/year". This tells you the representative has let his securities licenses lapse which means he or she should be providing investment advice for compensation as a Registered Investment Advisor or Investment Advisor Representative.
Describes the representative’s licensing at the national and state level. Make sure the representative is licensed to do business in your state.
Lists the licensing examinations that have been successfully completed by this representative.
Registration & Employment History
Lists the representative’s current and past employers. May be important if the representative has a history of job-hopping or has significant gaps in his or her employment.
Disclosures (Customer Disputes, Disciplinary, Regulatory)
This is the most important section of the BrokerCheck service. It is also the most confusing.
An investor, the representative’s company, or a regulatory agency can initiate an event that requires a disclosure that describes the complaint and the resolution.
Are there any events that require disclosure? If BrokerCheck’s answer is “No” you do not have to look any farther. If the BrokerCheck answer is “Yes” you should read disclosure.
Disclosures may be serious, non-events, or frivolous. The most serious disclosures describe events with the following outcomes:
A non-event disclosure occurs when the complaint is withdrawn.
Frivolous complaints result in a ruling against the person or organization that initiated the complaint.
Watch out for advisors who have multiple disclosures on their records. You want to be cautious even if some of the complaints are frivolous.
You may be alarmed that repeat offenders can retain their licenses and continue to sell investment products to the public. The financial service industry does not like to lose representatives who know how to sell investment products. Its solution is to make it your responsibility to uncover disclosures and know the difference between frivolous and serious complaints.
Investment Advisor Representative Information
An Investment Advisor Representative (IAR) registration is not a securities license. It is a form of registration that permits the advisor to provide financial advice and ongoing services for fees. Securities licenses permit representatives to sell investment products for commissions. IARs are listed with Registered Investment Advisors.
If the representative’s response is “No”, he or she does not hold this type of registration. If the representative’s response is “Yes”, he or she is registered is an IAR. By clicking on “Yes” you are taken to the Securities and Exchange commission’s website for IARs. The information on this site duplicates information that is found in FINRA’s BrokerCheck service.
No Record of This Representative
FINRA does not have any data that pertains to this person. Use extreme caution when this occurs. This person may be an unlicensed individual who is selling a scam.