FINRA BrokerCheck is a free tool that helps individuals conduct research on the professional experience of brokers and brokerages, as well as investment firms and advisors. FINRA, which stands for Financial Industry Regulatory Authority, is a private American company founded in 2007.
FINRA focuses on upholding the integrity and governance of the financial markets in the United States by ensuring that securities are licensed, advertisement of securities are honest, broker-dealer firms are compliant, and the actions of brokers and brokerage firms are ethical.
BrokerCheck, in particular, is a service that allows investors to research and understand the backgrounds of brokers and investment advisors. FINRA’s website contains information about brokers, brokerage firms, and investment advisors who are licensed and registered by the organization.
The background about brokers and brokerage firms can be found in the Central Registration Depository (CRD), which contains a database about registration and licensing. Information about investment firms and advisors comes from the Investment Advisor Registration Depository (ARD) database provided by the Securities and Exchange Commission (SEC).
Information in a BrokerCheck Report for Brokers
BrokerCheck contains information about brokers who were registered with FINRA within the last ten years. It also includes brokers who are no longer active in the financial industry. The report contains:
An overview of the broker’s credentials, licenses, registrations, and industry exams that they passed.
Information about employment history, which consists of a list of firms that they worked at for the last ten years. It includes part-time and full-time work, self-employment, unemployment, military deployment, and full-time education.
Summary of customer disputes, criminal incidents, and disciplinary actions, including allegations that may or may not be solved yet.
For brokers who are no longer registered with FINRA for ten years or more, the BrokerCheck report will also contain the same information as brokers who are registered with FINRA within the past ten years. The only difference is the section concerning disclosures about the broker’s criminal activity and customer complaints. In order for the disclosures to be included on the report, the broker must have been:
Convicted of or pled guilty for a crime.
Subjected to regulatory action.
Subjected to a civil injunction, which involves activities related to investments.
Violated policies or regulations concerning investment-related activities.
Involved with arbitration or civil litigation either as a respondent or defendant due to a violation of sales practices, which led to a civil judgment.
Information in a BrokerCheck Report for Brokerage Firms
FINRA also produces a report about brokerage firms, which contains the following information:
A summary of the firm and its background. The information includes where and when the firm was created, as well as a list of investors who own shares in the firm and individuals who exercise managerial control over the firm’s operations.
Overview of the firm’s background in mergers, acquisitions, and name changes.
Information about licenses and registrations.
Disclosures about disciplinary actions, awards from arbitration, and financial incidents. The section also includes allegations that may or may not be solved yet.
Why Do Individuals Use BrokerCheck?
Individuals use BrokerCheck as a way to acquire understanding about a broker, brokerage firm, or investment advisor before working with them. Since it provides information about licensing, an investor can assess the legitimacy of their professional experience. It allows them to make an informed decision on whether or not they would like them to be responsible for their investments.
Additionally, BrokerCheck is also a tool that anyone can use free of charge, which easily gives all interested parties access to information such as client complaints and employment history.
CFI is the official provider of the global Capital Markets & Securities Analyst (CMSA)® certification program, designed to help anyone become a world-class financial analyst. To keep developing your career and building new skills, the additional CFI resources below will be useful for your learning: