BrokerCheck is a FINRA service that allows investors to check the backgrounds of brokers (many, but not all, of which are called financial advisors these days) and brokerage firms. It also contains information on formerly registered brokers; many of these people may still be working in the securities or investment fields, and thus information about them may be of use to investors. The service is free, and data searches may be conducted through a website.
Reports on Brokers
For brokers who have been registered with FINRA within the last 10 years, including brokers who are not currently active, a BrokerCheck report contains:
- Summary data on the broker and his or her credentials
- A list of his or her current registrations, licenses and industry exams passed
- Registration and employment history: all FINRA-registered securities firms where he or she ever has been registered and also, for the past 10 years, all other work (both inside and outside the securities industry), military service, unemployment, and full-time education
- Disclosures about customer disputes, disciplinary events and financial matters on the broker's record, whether or not the broker actually was found to be at fault
- The broker's most recently submitted comments, if any
Be aware that not all actions and allegations on a broker's record actually indicate wrongdoing.
If the broker ceased being registered with FINRA more than 10 years ago, the only difference in the typical BrokerCheck report concerns the section dealing with disclosures. It includes certain criminal, regulatory, civil judicial, or customer complaint actions against the broker. Events are included in the report if the broker was:
- Subjected to a final regulatory action
- Convicted of (or pled guilty or no contest to) certain crimes
- Placed under a civil injunction involving investment-related activities
- Found by a civil court to be in violation of investment-related laws or regulations
- Named as a respondent or defendant in an arbitration action or civil suit alleging that he or she violated sales practices, and which produced an award or civil judgment against him or her
FINRA lists each event as reported by securities regulators, the individual broker, and any involved firms.
Reports on Brokerage Firms
The typical BrokerCheck report on a brokerage firm consists of:
- An overview of the firm and its background
- When and where the firm was established
- The people and organizations with controlling shares or influence over the firm's operations
- A history of mergers, acquisitions or name changes
- The firm's active licenses and registrations, the types of businesses it conducts and other details pertaining to its operations
- Disclosures about any arbitration awards, disciplinary events, and financial matters on the firm's record
Note that pending or unresolved actions may be included, and the presence of any such actions are not necessarily indicative of wrongdoing.
The information in BrokerCheck comes from the Central Registration Depository (CRD), which compiles the registration and licensing filed by brokerage firms and brokers. Regulators also supply information to CRD about certain disciplinary actions involving brokers and brokerage firms.
Currency of Information
Registered brokers and brokerage firms usually must submit updates to CRD within 30 days after he/she/it learns of an event. BrokerCheck reflects the new or revised CRD data immediately. Information normally is not updated for firms that are no longer registered with FINRA, or for brokers who are no longer registered with FINRA.
What BrokerCheck Does Not Include
- Judgments and liens originally reported as pending that later were satisfied
- Bankruptcy proceedings filed more than 10 years ago.
- Social Security Numbers
- Residential history information
- Physical description information
In general, BrokerCheck does not include any data that never flowed into CRD, nor does it include information that once did, but no longer. FINRA seeks to protect confidential customer information, exclude offensive or defamatory language, and suppress information that raises significant identity theft or privacy concerns.
New Disclosure Proposals
In 2012, FINRA has been considering increased disclosures in BrokerCheck, such as:
- Reasons for and comments related to a broker's termination
- Educational background
- Other professional designations, such as CFA or CFP
- More detail about investor complaints against brokers
Meanwhile, calls from investor advocates to include the scores obtained on exams such as the Series 7, are being opposed by FINRA, and are highly unpopular among brokers. Experts quoted in The Wall Street Journal ("Keeping Score: Investor Advocates Push for More Broker Disclosure, Including Grades on Exams," May 29, 2012) question the utility of reporting test scores, since they show do not correlate with future investment performance or service quality, the main drivers of client satisfaction.