Brokers and brokerage firms must register with the Financial Industry Regulatory Authority (FINRA) before they can legally sell securities in the United States.
By maintaining a registration system, FINRA can better monitor and record the activities of registered brokers.
These registrations are also open to the public, so investors can review the backgrounds of potential brokers before entrusting them with their money. You can look up your broker and brokerage firm by using their unique CRD (Central Registration Depository) number.
Central Registration Depository (CRD) & FINRA
FINRA manages the Central Registration Depository (CRD) program. This program covers the licensing and registration of individuals and firms in the securities industry in the United States. When a broker or firm registers with FINRA, the regulator assigns them a CRD number. Investors can use a broker’s CRD number to check that broker’s work history and disciplinary record using BrokerCheck.
A broker’s profile on BrokerCheck will contain useful information for investors. On any given profile, investors can find information related to
- The broker’s employment history, including dates and names of previous firms;
- Active and past exam certifications;
- Active and expired licenses;
- A complete history of complaints filed against the broker; and
- Any disciplinary actions taken against the broker.
Complaints and regulatory actions are called “disclosures,” and investors can see details about each one using BrokerCheck. If the claim was settled, BrokerCheck displays the settlement along with the claimed allegations and the broker’s response, if any.
Why It’s Important to Investigate a Potential Broker
An investment broker is responsible for handling a significant portion of your assets. For that reason, you should learn as much about them as possible before giving them control. Doing your research before handing over your money can save you time and stress in the long run by helping you avoid unscrupulous brokers.
If a broker’s disclosure history shows several complaints, each of which the broker denies, you can make the decision to move on or bring up your concerns. In any case, having more information about your broker’s past allows you to make a smarter decision about who is managing your money.
How to Find a Broker’s CRD Number
Before engaging a broker, you have the legal right to request their CRD number. If a broker refuses to provide this information to you, stop and find another broker to work with. Any broker unwilling to give you their CRD number likely has something to hide and is probably not someone with whom you want to invest.
While asking your broker directly is the fastest way to get their CRD number, the information materials and agreement you receive before engaging your broker will likely contain this information as well. Regardless of how you obtain it, searching your broker’s CRD number is an important step when hiring a broker.
How to Do a FINRA BrokerCheck CRD Number Search
Finding information about a broker or firm in the past used to be a hassle. Fortunately, BrokerCheck makes it easy to research a broker with whom you want to invest. After visiting the BrokerCheck website, there are a few things you can do to check out a broker or firm.
Search by CRD Number, Broker, or Firm Name
Using the “Individual” or “Firm” search options, you can search for your broker by CRD number or name. Because many brokers may have the same or similar names, using a CRD number ensures that you find the right BrokerCheck report.
You can also search for a specific brokerage firm using its CRD number or name. Doing so will return a report with much the same information as a broker search. Additionally, you can see a list of the direct owners and executive officers of the firm and information about when the firm was established.
Examine Your Broker’s Employment History and Experience
In the “Previous Registrations” section of the BrokerCheck report, you can see a chronological list of the firms with which the broker was previously registered. If you are concerned about gaps in employment or short tenures, you can discuss them with your broker.
Check Your Broker’s Licenses and Exam History
BrokerCheck also provides a comprehensive list of the examinations and licenses your broker has obtained. In addition to FINRA registration, your broker may have broker or financial adviser registrations in other states.
The “Examinations” section shows you the date and type of exam your broker passed. If you are interested in a specific type of security or curious about the broker’s overall certification status, you can check that there.
Read Through Any Disclosures
BrokerCheck disclosures cover not only customer disputes and disciplinary actions but employment terminations, bankruptcy filings, and criminal and civil proceedings as well. If a broker was the subject of a court-ordered lien or other debt, it will show up with the other disclosures.
This is the most important section to review while researching your broker. If there are no disclosures, then you’re good to go. If there are, however, then you should read through them carefully to decide whether to find another broker.
Just because a customer dispute is filed does not mean that the broker engaged in wrongdoing. In many cases, the claim may not even reference the individual broker directly even if it shows up in the BrokerCheck report. Essentially, the existence of one or more disclosures does not automatically mean that the broker is bad. You should review and follow up on any disclosures you are concerned about.
Do You Need a FINRA Attorney?
If you’ve lost money and believe you are a victim of investment fraud or broker misrepresentation, contact a FINRA arbitration attorney as soon as possible. The Law Offices of Robert Wayne Pearce has more than 40 years of experience helping our clients recover their money from bad investments. Contact us today or give us a call at 561-338-0037 for a free consultation.