Did you know that if your financial adviser has prior complaints or disciplinary actions, they may be listed in a public record database you can access online in seconds? For the past 15 years, we have been helping investors who have claims against their financial advisers for fraud and other misconduct. One of the many tools we use regularly to check on financial advisors’ background information is a very easy and very effective one that not a lot of people actually know about.
We repeatedly recommend individual investors to do their research before handing over their life savings to an investment professional. Just a little extra time invested in research can go a long way in reducing the chances of becoming a victim of investment fraud. If you’re not sure where to start, keep in mind that a big part of that research is checking up on your financial advisor or brokerage firm so that you know you are dealing with someone who is properly registered and does not have a history of significant disciplinary actions or complaints.
Every financial advisor licensed to sell securities in this country has what is called a CRD number. CRD stands for Central Registration Depository which is a database that holds information about financial advisors and brokerage firms maintained by the Financial Industry Regulatory Authority, FINRA. FINRA is a non-governmental regulator for all securities firms in the United States. FINRA is subject to the oversight from the Securities and Exchange Commission, the SEC, which is the government agency that serves as the ultimate regulator of the securities industry.
Although the CRD report is not all-inclusive and can sometimes be incomplete, it does include certain information about licensing, registration, professional background, complaints, and disciplinary actions. From the time they register and throughout their careers in the securities industry, financial advisors and brokerage firms must inform FINRA if certain events occur. These events can include regulatory actions, criminal convictions, and customer complaints. Every time an update is sent to FINRA, it should end up on the financial advisor’s CRD report.
You can use a financial advisor’s CRD number to confirm whether your financial advisor is registered in your state, learn what licenses they possess, which brokerage firms they are registered with, and to find out if there are customer complaints against that representative or his or her brokerage firm. This database also has qualification and additional employment information. There are some things the CRD report will not tell you. For example, some information is removed after a certain time period such as bankruptcies over 10 years.
It’s also possible that a financial advisor has worked in other parts of the financial services industry, for example, insurance or banking. The CRD report may not have information about those industries. Also, there is a process available to financial advisors where they can have customer complaints removed, a process called expungement. So, it may be that a financial advisor may have had prior customer complaints, but they may not show up on the report if the financial advisor was successful in having the complaints expunged.
And although financial advisors and brokerage firms are required to update their professional and disciplinary information, generally within 30 days of an event happening, the CRD report does not have information until it is reported to FINRA. So there may be instances where certain events go unreported and therefore, would not appear on the CRD report. To obtain the report, it’s easy. Use the link on our website to go to FINRA’s BrokerCheck. Click the start search button, review and agree to the terms and conditions, and click continue.
Type in your financial advisor’s name and click start search. Locate your financial advisor or firm in the search results and click on his or her name. You should now be able to view your financial advisor’s detailed report in a PDF form. Although we often stress looking up your individual financial advisor, it can also be helpful to look up information about the brokerage firm itself, particularly if the financial advisor you may be working with is registered with an independent or small brokerage firm. Searching a firm’s name, you can access information about the business in general, licensing and registration, who owns the firm, any history of changes in names and / or ownership, and disciplinary actions and securities arbitration decisions against the firm.
I encourage you to explore this website and learn more about the regulation and reporting of financial advisors and financial advisory firms. If you would like to learn more about how our firm may be able to help you or someone you care about, please call our toll-free number (800) 738-1960 or submit our online contact form.