What is BrokerCheck and How Can It Help Investors?

A broker or financial advisor plays a significant role in managing your financial assets and sometimes making investment decisions on your behalf. By conducting thorough research and due diligence, you can ensure that the professional you wish to hire has a good track record, follows ethical practices, and aligns with your investment goals and preferences. Moreover, researching the advisor or broker can also help you understand their fees, services, and regulatory compliance. This helps in avoiding potential fraud or mismanagement of funds and ensures that your investments are in safe hands. 

BrokerCheck is a free service that lets you look into the records and past performance of brokers and advisors. The service can also be used to get information on brokerages and advisor firms. It offers all the essential information on the professional so you can make an informed decision. 

Read below to find out more about BrokerCheck, and an overview of how investors can use it to evaluate financial professionals and firms. 

If you’re looking for qualified professional advisors who can help you manage and grow your finances, consider using the free advisor match service.

What is BrokerCheck?

FINRA BrokerCheck is a tool that any investor can use to find out more about the professional background of a broker, investment advisor, brokerage firm, or advising firm. The tool is offered and regulated by the Financial Industry Regulatory Authority (FINRA), a private corporation that regulates member brokerage firms and exchange markets. 

BrokerCheck can help you check the following:

1. The advisor or broker’s qualifications, their license, and where they are registered 
2. The firm where the broker or advisor currently works
3. The professional's employment history for the past ten years, including any work experience outside the brokerage industry
4. The broker's recently submitted comments
5. Disciplinary actions taken against the professional
6. Investment-related civil actions or proceedings against the professional 
7. Investment-related disputes the broker is committed or charged with
8. Consumer complaints against the professional
9. Civil lawsuits against the professional
10. Bankruptcy proceedings against the professional
11. Job termination by an employer due to disputes, allegations, or misdemeanors 
12. Criminal felonies the broker or advisor committed/is charged with, if any

In the case of firms, the service can help you check the following:

1. An overview of the firm
2. A profile of the firm, including the date and location of the establishment, investor names, etc. 
3. A history of the firm, including a timeline of mergers, acquisitions, or name changes
4. Details on the operations of the firm, including the list of licenses and registrations, business activities, etc.
5. Disclosure on disciplinary actions, arbitration awards, etc. 

How to use BrokerCheck

FINRA BrokerCheck is simple to use and takes very little time. You can go to the platform at www.finra.org/brokercheck and enter the individual or firm's name you wish to look up. You can narrow down your search by entering other details, like the location of the individual or firm. Based on the results, you can then generate a report which will contain all information on the professional. 

How does BrokerCheck work?

FINRA BrokerCheck uses information from two databases:

Central Registration Depository (CRD): 

This is a registration and licensing database. It includes details on registration and licensing forms filled out by brokers, firms, and regulators.

Investment Adviser Public Disclosure (IAPD):

IAPD is a Securities and Exchange Commission (SEC) database that includes information, such as employment history, disciplinary actions, arbitration awards, etc., of investment advisors and firms. All advisors are required to submit these filings to the online Investment Adviser Registration Depository system of the SEC. 

Understanding the BrokerCheck report dispute

The reports from BrokerCheck can sometimes contain a notation that the person is under dispute. This usually happens when the broker or firm in question may have raised a dispute due to incorrect information on the platform. 

If the information provided by BrokerCheck is factually misleading, brokers and firms can submit a dispute to FINRA by filling out a dispute form. The claims are investigated by FINRA, if eligible and the information is updated on the platform, if necessary. The dispute notification will reflect on the portal until the investigation is complete and all information has been updated. 

However, it is essential to note that only disputes on factual information can be investigated and corrected by FINRA. Some matters that may be open to interpretation are not entertained by FINRA. 

How can BrokerCheck help investors?

FINRA BrokerCheck can help investors find out core information about brokers and investment advisors. It offers the following benefits to investors:

1. The online service can protect you from fraudulent brokers and professionals. With the growing popularity of digital financial planning services and the internet becoming a medium for hiring financial advisors, more and more investors can fall victim to scams and cybercrimes. There are a number of fake websites online that take money from investors and users without offering them any services in return. Some professionals can also misguide investors into investing in bogus investment products. These can be hard to spot for the average investor. With BrokerCheck, you can conduct a thorough financial broker background check and be certain of the professional you hire. 
   
   
2. BrokerCheck helps you verify the background information and licenses of a professional. Many a time, scammers use the data of other registered professionals to trap investors. Fake names and licenses can mislead investors into hiring brokers with a dainty track record and losing money. BrokerCheck ensures these instances are far and few and that people are empowered to make the right financial choices. 
   
   
3. The platform stores all data on the broker or investment advisor for ten years after the termination of the FINRA registration. In some cases, the service may also maintain information indefinitely, allowing investors to access data from a long time ago. 
   
   
4. In addition to the benefits given above, BrokerCheck is a free tool. It can be accessed by anyone at any time. It does not cost additional resources, which makes it ideal for young and experienced investors and people from diverse income backgrounds. Moreover, the platform is easy to use and does not require expert knowledge of the financial advising or brokerage industry. The information is provided in a simplified manner that is comprehensible for everyone. 

How can BrokerCheck help brokers, investment advisors, and firms?

Along with being a boon for investors, the platform is also of significance for brokers, investment advisors, and firms. These professionals can use the platform to attract new clients. Professionals with a clean record on BrokerCheck can reach out to more customers and upscale their business quickly. Further, the platform also ensures the information on the professional is accurate at all times. Individuals and firms can raise a dispute anytime in the case of incorrect or misleading factual details. This helps them maintain authenticity and transparency.

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What should investors keep in mind when using BrokerCheck?

While running a check on a financial advisor or broker on the platform, you must keep the following things in mind:

1. BrokerCheck is not a comprehensive background check. The platform lacks information on specific areas, such as civil litigation unrelated to investing. This can be a limitation as you may not be aware if the person you are hiring was or is involved in civil litigation.  
   
   
2. The platform does not include information on customer complaints outside of sales practice violations, fraud, and theft. 
   
   
3. If the professional has been arrested or criminally charged for issues other than investing, such as breach of trust, the platform will not disclose the details of the same.  

What other options can you use to run a background check before hiring a professional?

Here are some tools that can help you confirm your choice:

1. Apart from BrokerCheck, FINRA offers two other databases that you can refer to to check arbitration awards and disciplinary actions against individuals and firms. FINRA also allows you to check the names of brokers barred by the organization.


2. In addition to this, you can look for state securities regulators and see if you can get any information on the brokers, investment advisors, or firms you wish to hire. 


3. You can search on the Internet and look at customer reviews or complaints on the web. Organic reviews and word-of-mouth promotions can help in most cases. 


4. It also helps only to check verified financial advisor search tools. These tools only connect you to professionals with a clean record. Moreover, the system would have already vetted the professionals and completed a background check on them. 


5. Make sure to reach out to companies or independent advisors and brokers with some years of experience, as this can be a sign of their credibility. 


6. You can also reach out to friends, family, or colleagues for recommendations to hire the right professional. 

To conclude

Hiring a professional investment advisor or broker can help you achieve financial freedom, sort out your financial concerns, choose the best investment options for your needs, and plan for the future without unnecessary hassles and stress. However, for all of this to be true, it is necessary for you to choose someone you can rely on. It is common for investors to fall for scams. However, this should not stop you from hiring a financial advisor or broker. Instead, you can use the right tools and measures, such as FINRA BrokerCheck to investigate the person or firm in question and be sure of the choice you make. If you do not wish to use BrokerCheck, it is essential to use other trustworthy tools when looking for financial advisors. 

Use the free advisor match service to find a qualified and worthy broker or investment advisor to ensure you have a dependable professional in your journey of financial independence. All you need to do is answer a few simple questions on your financial needs, and the match tool can help connect you with advisors that are best suited to help you reach your financial goals and requirements.