Financial Planners
Information Online - How to Check Broker and Financial Advisers
Background - What to Look For When Choosing One
May 29th 2006
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There are Federal and state laws that require both brokers and
investment advisers and their firms to be licensed or registered. This
provides important data for those seeking information about specific
advisors. According to the Securities and Exchange Commission (SEC),
“The good news is that this information is easy to get, and one phone
call or web search may save you from sending your money to a con artist,
a bad financial professional, or disreputable firm.”
It is recommended that before you invest or pay for a financial planner,
make sure they are licensed. Also check to see if their firm has had
“run-ins” with regulators or other investors. The SEC warns that if you
do business with an unlicensed company that later goes out of business;
there may be no way for you to recover your money. If the firm is
licensed and insured you may stand a better chance.
There is a central database called the
Central Registration
Depository (or "CRD") which contains information about most brokers,
and the firms they work for. This information will include serious
complaints from investors, the education and background of the brokers
and where they’ve worked before their current job.
According to the SEC, all you need to enter is the NASD to provide you
with information from the CRD. Your state securities regulator may
provide more information from the CRD than NASD, especially when it
comes to investor complaints, so you may want to check with them first.
The SEC also provides a BrokerCheck hotline number (800) 289-9999.
Typically, people that get paid for giving advice about investing in
securities have to be registered with either the SEC or the state
securities agency where they have their principal place of business.
Those advisors that manage $25 million or more must register with the
SEC. Even the employees that work for advisor companies must be
registered or registered.
The SEC says that potential customers should read their registration
forms. These are called the “Form ADV.” This form is composed of two
parts. Part one has information about the adviser's business and
whether they've had problems with regulators or clients. Part two
outlines the adviser's services, fees, and strategies.
You can view these documents online at the
Investment
Adviser Public Disclosure (IAPD) website. Although the data only
includes the adviser firms that register electronically using the
Investment Adviser Registration Depository, it is still worth a try.
Otherwise you can get the forms from the state licensing agency or the
SEC for an minimal cost.
Office of Public Reference
Room 1580
100 F Street, NE
Washington, D.C. 20549-0102
phone: (202) 551-8090
fax: (202) 777-1027
e-mail:
publicinfo@sec.gov
There is a Securities
Investor Protection Corporation (SIPC), which provides limited
customer protection. If a brokerage firm and its clearing firm are
members of the if a brokerage firm becomes insolvent — although it does
not insure against losses attributable to a decline in the market value
of your securities – this may help you recover funds if there is a
bankruptcy.
Dan Wilson
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