FINRA BrokerCheck: Defend Against Investment Fraud and Abuse

Consumers frequently rely on online reviews to help them make decisions about where to spend their money.

Homeowners have Angie’s List to research a variety of home-improvement professionals; vacationers can check hotel ratings, pictures and pricing on TripAdvisor; and Consumer Reports provides reviews and ratings on a variety of consumer products.

The Financial Industry Regulatory Authority, known as FINRA, wants their BrokerCheck website to be the first stop for investors before they invest with a broker or financial adviser. The agency is currently running a series of funny print, TV and online ads that scold consumers for not checking out potential brokers and investment advisers as thoroughly as they would their hotel room or flat-screen TV.

“People immediately go online to check out a new restaurant where they might spend $25 for a meal, but don’t think to use BrokerCheck when they’re handing over $2,500—or $25,000 of their life’s savings or even more—to an investment professional to invest. That has to change,” Richard G. Ketchum, FINRA’s CEO, said in a press release.

But just as online review websites have been scrutinized for their accuracy and trustworthiness – critics say FINRA’s BrokerCheck system is missing key pieces of information that investors need in assessing a financial broker.

In fact, a 2014 Wall Street Journal investigation found that the database failed to include criminal records or personal bankruptcy filings of some 1,600 brokers.

Most Current Data vs. Compilation of Historical Data

FINRA’s BrokerCheck extracts information from the Central Registration Depository (CRD), a computerized database that contains information on licensing and registration information on more than 650,000 stockbrokers. But not all information contained in the CRD is included in the BrokerCheck report.

Investors who want a more comprehensive report should check with their state securities regulator.

“While BrokerCheck is a good basic tool for investors, it shouldn’t be their only means of checking the background of a broker or brokerage firm,” says Pam Epting, Director, Division of Securities for the Florida Office of Financial Regulation.

Epting explains that BrokerCheck provides the most recent form filing made within the CRD system, while a state securities check, referred to as a Snapshot, provides a more detailed compilation of a broker’s entire history.

“So for example, on BrokerCheck you may see when a broker left a firm, but on a CRD Snapshot you would see why the broker left and the reasons behind their separation from the firm,” says Epting.

According to the Wall Street Journal investigation, some of the information not visible to investors who only consult BrokerCheck includes:

  • Investment or fraud-related investigations by former employers
  • Some regulatory probes and civil charges
  • Certain employment terminations
  • Personal bankruptcies filed more than 10 years ago
  • Judgements and liens that have been satisfied

“We as state regulators encourage people to do as much research as they can. A good first step is to look at BrokerCheck, but continue that due-diligence and contact your state regulators to see what more you can find out about the person,” states Epting.

Epting also encourages investors to call with any questions they may have on the CRD Snapshot. “If you don’t understand the information in front of you, ask us. While we can’t tell whether someone is a good broker or not, but we can certainly help you better understand the material.”

While the majority of brokers, brokerage and investment firms are honest and reputable, there are some that may not be. As the Securities and Exchange Commission (SEC) cautions, “it’s up to you to find the information and use it to protect your investment dollars.”

Recap: To review a broker or brokerage firm, visit:

Basic Check: The Financial Industry Regulatory Authority (FINRA) BrokerCheck (

Comprehensive Check: The North American Securities Administrators Association ( for a state-by-state list of state securities regulators (

To search for an investment adviser representative and firms registered with SEC and/or state securities regulators; visit the Investment Adviser Public Disclosure (IAPD) on the SEC website ( IAPD also provides links to FINRA’s BrokerCheck system.

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