Before you agree to use a stockbroker, here's how to check out their history.

This advice comes from the North American Securities Administrators Association.

We know: How to Check Out a Stockbroker or Firm

Who keeps information and records on stockbrokers and brokerage firms?

A stockbroker or any other person who wants to sell securities (for example, stocks, bonds, mutual funds, etc.) must be licensed or registered.

Information on more than 600,0000 licensed stockbrokers and firms is available on a computerized database called the Central Registration Depository system ("CRD"). Every state securities regulator can access the CRD database.

How do I get access to this information?

As an investor, you can request a public report of background information on any stockbroker or brokerage firm. Depending on the state jurisdiction, this report can be obtained either free of charge or for a nominal fee.

What kind of information will I find on the CRD database?

The CRD can tell you a broker's:

  • Employment history for the past 10 years
  • Securities examination scores
  • Licensing or registration status
  • Disciplinary history

What, exactly, can I learn about the disciplinary history of a broker or a firm?

You can learn:

  1. Final disciplinary actions (relating to securities or commodities businesses) that have been taken by federal, state, and foreign securities regulators as well as self-regulatory organizations such as the National Association of Securities Dealers Regulation.
  2. Civil judgments and arbitration decisions in securities and commodities disputes involving public customers.
  3. Criminal convictions or indictments against registered or licensed brokerage firms and their associated persons.
  4. Settlements of $10,000 or more among the parties to arbitrations, civil suits, and customer complaints involving securities or commodities transactions.
  5. Employment terminations after allegations were made involving violations of investment-related statutes or rules, fraud, theft, or failure to supervise investment-related activities.
  6. Bankruptcies filed within the last 10 years and outstanding liens and judgments.
  7. Pending disciplinary actions taken by industry regulators that relate to securities or commodities business.
  8. Pending arbitrations and civil proceedings involving securities or commodities transactions.
  9. Pending written complaints alleging sales practice violations and compensatory damages of $5,000 or more.

How do I request a report?

To obtain a CRD report, call your local state securities regulator. As a matter of practice, stockbrokers and brokerage firms are not advised of your request. If you need to find out how to contact your state securities regulator, you can call the North American Securities Administrators Association.

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