BrokerCheck
What Is BrokerCheck?
BrokerCheck is a free online tool provided by FINRA (Financial Industry Regulatory Authority) that allows investors to research the professional backgrounds of brokerage firms and individual brokers. It provides information on employment history, licensing, and disciplinary actions.
BrokerCheck is effectively the "rap sheet" for the financial industry. Before handing your life savings to an advisor, you need to know if they are trustworthy. By typing in a name or firm name, you can instantly see: 1. Status: Are they currently registered to sell securities? 2. History: Where have they worked? (Job hopping can be a bad sign). 3. Disclosures: This is the most critical section. It lists every customer complaint, lawsuit, arbitration, regulatory fine, bankruptcy, and criminal charge in their career. Even if a complaint was "settled" or "denied," it stays on the record for years. A clean record will show "No disclosures."
Key Takeaways
- It is the official database for checking if a financial professional is licensed.
- It reveals "Red Flags" like customer complaints, regulatory fines, or criminal charges.
- It covers both brokers (registered representatives) and investment advisers.
- Using it is the first step in due diligence to avoid investment fraud.
- Information comes from the Central Registration Depository (CRD).
How to Read a Report
When you pull a report, look for the "Disclosure Events" summary. * Customer Disputes: Allegations of unsuitability, unauthorized trading, or churning. One or two in a 20-year career might be frivolous. Five or six is a pattern. * Regulatory Actions: Fines or suspensions from FINRA or the SEC. These are serious. * Employment Separations: Was the broker "permitted to resign" or "discharged" (fired) from a previous firm? Why? * Financial Disclosures: Personal bankruptcies or tax liens. If they can't manage their own money, can they manage yours?
Real-World Example: Spotting a Bad Apple
An investor meets a charming advisor promising 15% returns.
Why It Matters
The vast majority of investment fraud is committed by unregistered individuals or brokers with a history of misconduct. Ponzi schemes like Bernie Madoff often rely on trust and lack of verification. Checking BrokerCheck takes 2 minutes and is the single most effective way to protect yourself from fraud.
FAQs
Yes, completely free and open to the public. You do not need to sign up.
It covers brokers (FINRA) and Investment Advisers (SEC/State). It links to the SEC's IAPD database for investment adviser details.
If they are selling you securities and aren't on BrokerCheck, they are likely operating illegally. Report them to FINRA immediately.
It is very difficult. They can apply for "expungement" through arbitration, but they must prove the claim was false or erroneous. Critics argue expungement is too easy, but the record is generally permanent.
The Bottom Line
BrokerCheck is the background check of the financial world. Trust, but verify. There is no excuse for an investor today to work with a professional without first vetting their record on this database. It is the first line of defense against incompetence and fraud.
Related Terms
More in Securities Regulation
At a Glance
Key Takeaways
- It is the official database for checking if a financial professional is licensed.
- It reveals "Red Flags" like customer complaints, regulatory fines, or criminal charges.
- It covers both brokers (registered representatives) and investment advisers.
- Using it is the first step in due diligence to avoid investment fraud.