What is BrokerCheck and How Can It Help Investors?

Before you hire a financial advisor or a broker, you need to be sure that the person who would eventually help you with your money has the right credentials, experience, and track record. The same applies to investment firms. Anyone who handles your hard-earned money carries a huge responsibility, and if something goes wrong, the impact can be significant. That is why doing a background check is essential.

FINRA's BrokerCheck is a free tool that allows you to verify the credibility of financial professionals and firms. Let's find out more about BrokerCheck and how it can help you make more informed investment decisions.

What is BrokerCheck?

BrokerCheck is an online tool that is offered and administered by the Financial Industry Regulatory Authority, or FINRA. FINRA is the largest non-governmental regulator of securities firms in the United States. Even though it is not a government agency, it plays a key role in overseeing brokers and investment firms. BrokerCheck is one of the main tools FINRA provides to help you run a background check on professionals before you hire someone.

The tool is free and available online, designed to help you research brokers, financial advisors, and investment firms. When you search for a person or firm on BrokerCheck, you get access to a wide range of information. This includes descriptions of who they are, the services they offer, the credentials they hold, and the types of registrations they maintain. You can also see whether they have faced any sanctions, disciplinary actions, or regulatory issues. All of this can help you decide whether a professional is suitable for you to work with.

The database behind BrokerCheck is massive!

It contains details on about 3,378 brokerage firms, 150,647 branch offices, and more than 620,882 registered securities representatives. So, the tool covers a wide range of financial professionals in the U.S. securities industry, making it a one-stop platform for most, if not all, your inquiries.

Most of this information comes from the Central Registration Depository, commonly called the CRD. The CRD stores the licensing and registration information of brokers along with their disciplinary histories. Registered brokers and brokerage firms must update their professional and disciplinary information in the CRD within 30 days. Once they do, the updated information becomes available on FINRA BrokerCheck as of the next business day.

If the broker you are searching is also registered as an investment advisor with the Securities and Exchange Commission, BrokerCheck will link you to the SEC's Investment Advisor Registration Depository (IARD).

While the tool can help you learn more about an individual or firm's licenses, qualifications, and more, it also shows any disclosures on their record. In fact, one of the core reasons FINRA BrokerCheck was developed is to help you screen financial professionals and avoid hiring those who have made disciplinary errors in their professional service. BrokerCheck FINRA gives you a complete history of the professional and helps you determine whether the professional was involved in any disputes.

What information can you get on BrokerCheck?

The FINRA BrokerCheck report is divided into different sections. Here’s a brief explanation of each:

• Summary: The summary is usually the first section in the report. This section provides information on the professional's current job functions and major credentials.
• Qualifications and licenses: Once you scroll past the summary, the next section is qualifications and licenses. This part lists the exams the individual has passed and the licenses they hold. You can browse the professional's qualifications and select people who are suited to your exact needs.
• Registration and employment history: This section shows where the broker is currently employed, along with their employment history over the last 10 years. It also tells you if the individual was unemployed at any time during these years. Additionally, it includes information on full-time or part-time roles, military service (if any), and years of study or upskilling (if any). It also specifies which securities firms they were registered with and whether their employment was inside or outside the industry.
• Disclosure: This section contains details about any disputes against the professional. If there are any disciplinary actions, customer complaints, fraud, or criminal activities associated with the individual, they would be in this section. You can also find details of unresolved matters here. Additionally, you get access to any comments the individual most recently submitted regarding these items.

BrokerCheck does not limit itself to individuals. You can also look up investment firms. The FINRA investment advisor check summary provides relevant details about the firm's background and history. You can check the firm's profile and leadership. And just like with individuals, firms have a disclosures section too. This contains information on arbitration awards and disciplinary actions concerning the firm. You will also find a section outlining the firm's history of mergers, acquisitions, and name changes.

Additionally, you check the firm's licenses and registrations to gain insight into the kind of business the firm engages in and whether there are any operational disclosures you should know.

It is important to note that FINRA BrokerCheck maintains records of professionals who are actively working in the industry. Their details are maintained in the BrokerCheck archives for 10 years after they registered with FINRA or a national securities exchange, even if they stop working. And sometimes, even after those 10 years are up, the person still stays in the system. But this usually happens only if they fall into specific categories.

For instance, if they were the subject of a final regulatory action, they remain searchable. The same holds if they were convicted of or pleaded guilty to certain crimes. Civil injunctions related to investment activity also keep someone on the system, as do being named in arbitration or civil litigation in which the person was accused of a sales practice violation, and the case resulted in an award or judgment against them.

How does FINRA BrokerCheck help investors?

One of the most significant advantages is that FINRA BrokerCheck is completely free. You just type in a name, and the information is right there for you. And because the database is so vast, you get information about a broker, a financial advisor, or even a firm, all in the same system. It is also very simple to use. You browse through the reports on your computer or smartphone anytime you want. If you want a step-by-step walkthrough, check out this online guide that walks you through using FINRA BrokerCheck to evaluate a financial professional's credentials.

But the benefits of using FINRA BrokerCheck go beyond convenience. BrokerCheck actually helps keep the entire industry more accountable. When professionals know their records are public and easily accessible, they are more cautious. They understand that investors can see their history, their disclosures, and their compliance lapses. And because of this transparency, they are motivated to stay on the right track.

Professionals are also encouraged to consistently follow the rules. Staying compliant with federal regulations, following FINRA's standards, and respecting their firm's internal policies become essential to keep their BrokerCheck record clean. The tool basically reinforces good behaviour. The system also encourages professionals to improve themselves. They understand the importance of staying up to date, continually educating and upskilling themselves, and adhering to established standards.

It also allows investors to make better decisions. For example, if a financial professional has multiple disclosure events or disciplinary actions from regulatory authorities, you can choose not to work with them.

You can also use information like frequent job changes or unexplained gaps in employment to make a decision about whether or not you want to hire such a professional. On the other hand, if the person has a clean record on FINRA BrokerCheck, it gives you more confidence to move ahead and trust them with your investments.

Other FINRA tools you can use

BrokerCheck FINRA is usually the first place most investors turn. But FINRA also offers two additional databases.

• The first is FINRA Arbitration Awards Online, which provides the full text of arbitration awards issued by arbitrators.
• The second database is FINRA Disciplinary Actions Online, which provides information on disciplinary matters issued by FINRA in 2005 or later.

Why BrokerCheck matters

FINRA BrokerCheck can be a great tool for investors nationwide. With its transparent, regularly updated database, it answers your key questions and helps you make informed choices about the professionals you trust with your financial future. It gives you a clear view of a financial advisor's background, so you can make a confident decision.

If you are actively looking to hire a financial advisor, another helpful online resource is our financial advisor directory. The tool connects you with vetted financial advisors in your area. Together, these tools make it easier for you to navigate the financial world.

Frequently Asked Questions (FAQs) about BrokerCheck FINRA

1. Is the BrokerCheck FINRA free to use?

Yes, the BrokerCheck FINRA tool is free to use and can be accessed online.

2. What to do if I find a complaint against the professional I am working with on BrokerCheck FINRA?

Finding a complaint is not automatically a sign that you should stop working with your financial advisor, but it is definitely a sign that you should look closer. You can start by understanding the nature of the complaint and whether it is legitimate. Not every dispute is a red flag. Sometimes disagreements can arise simply because of differing expectations or misunderstandings, especially for advisors who have been in the industry for decades.

It is also helpful to look at the bigger picture. For instance, you can consider how many complaints the financial advisor has received and over what period. For example, say an advisor has been working for over 20 years and has one complaint registered against them. This can just be a misunderstanding or a difference of opinion. However, if the financial advisor has 10 years of experience and has eight disputes, this might be cause for concern.

3. Is FINRA a government agency?

No, FINRA is not a government agency.

4. If I look up a professional on FINRA BrokerCheck, will the individual be notified of my search?

No, your FINRA BrokerCheck searches are confidential and not shared with anyone.