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How to check on a broker's honesty

How do you know your broker is ethical, responsible and looking out for your best interest? The truth is, you often don't.

That reality was hammered home by reports in the Wall Street Journal and by a group of attorneys who represent small investors in lawsuits. Both rebuked the investment world's regulatory body, known as FINRA, for not doing enough to disclose bankruptcies, tax liens, financial fraud and other red flags in some brokers' histories.

Specifically, they criticized FINRA's online tool, BrokerCheck, long considered the gold standard of regulatory disclosures, which allows consumers to check on the education, credentials and disciplinary history of any broker. While easy to use, BrokerCheck doesn't include every detail.

And those details — bankruptcies, criminal charges and firings — should be there, say critics. In its March 6 report, the attorney group, Public Investors Arbitration Bar Association said the omission of missing details "is so serious that unwitting investors relying on BrokerCheck may very well select brokers with whom they would not do business if they had access to the more complete picture … "

So what's an investor to do in searching for a trusted adviser with a clean record?

"Even if it's not 100 percent complete information, BrokerCheck still has valuable information that can help people make an informed decision in choosing a financial professional," said Mark Leyes, spokesman for the California Department of Business Oversight.

Investors should always ask questions and get answers in writing. Among those questions: What is your education and what are your credentials? How are you compensated (fees, commissions, etc.)? How much will be deducted from my account on an annual basis? What services and written reports will you provide?

Where to check on financial advisers:

Certified Financial Planner Board: It enforces ethical standards among its 69,000 members. To search a CFP's disciplinary history or bankruptcy record, go to:

FINRA: Its consumer tool, BrokerCheck, lets you search for financial advisers by name to check for disciplinary actions, bankruptcies and certain criminal records, along with licensing and employment history. Go to: or call 1-800-289-9999.

SEC: Its website lets consumers look up records on individual investment advisers, brokers and firms on its "Investment Adviser Public Disclosure" page at

Paladin Registry: A consumer-oriented site that vets thousands of brokers nationwide, based on education, ethics, business practices and other data.

How to check on a broker's honesty

04/19/14 [Last modified: Sunday, April 20, 2014 6:32pm]
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