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Check Out Your Broker or Advisor


Federal or state securities laws require brokers, advisers, and their firms to be licensed or registered, and to make important information public. But it's up to you to find that information and use it to protect your investment dollars. The good news is that this information is easy to get, and one phone call may save you from sending your money to a con artist, a bad broker, or disreputable firm.

Before you invest, make sure your brokers, investment advisers, and investment adviser representatives are licensed to sell securities. Always check and see if they or their firms have had run-ins with regulators or other investors.

The Central Registration Depository (CRD)

The CRD is a computerized database that contains information about most brokers, some investment advisers, their representatives, and the firms they work for. For instance, you can find out if brokers are properly licensed in your state and if they have h ad run-ins with regulators or received serious complaints from investors. You'll also find information about the brokers' educational backgrounds and where they've worked before their current jobs.

You can ask either your state securities regulator or the National Association of Securities Dealers (NASD) Regulation, Inc. to provide you with information from the CRD. (Your state securities regulator may provide more information from the CRD than the NASDR, especially when it comes to investor complaints, so you may want to check with them first).

You can find out how to get in touch with your state securities regulator through the North American Securities Administrators Association, Inc.'s web site. You can go to NASD Regulation, Inc.'s web site to get CRD information, or call them toll-free at ( 800) 289-9999.

Some investment advisers and their representatives are on the CRD because they are also brokers, but many are not listed there. To check out investment advisers and their representatives, you'll have to talk with your local state securities regulator and get a copy of their Form ADV.

Investment Advisers

People or firms that get paid to give advice about investing in securities generally must register with either the SEC or the state securities agency where they have their principal place of business. Investment advisers who manage $25 million or more in client assets must register with the SEC. If they manage less than $25 million, they must register with the state securities agency in the state where they have their principal place of business.

Some investment advisers employ investment adviser representatives, the people who actually work with clients. In most cases, these people must be licensed or registered with your state securities regulator to do business with you. So be sure to check the m out with your state securities regulator.

To find out about advisers and whether they are properly registered, read their registration forms, called the "Form ADV." The Form ADV has two parts. Part I has information about the adviser's education, business, and whether they've had problems with re gulators or clients. Part II outlines the adviser's services, fees, and strategies. Before you hire an investment adviser, always ask for and carefully read both parts of the ADV. If an investment adviser won't give you Part I of the ADV, don't do busines s with them.

You can get copies of Form ADVs from the investment adviser, your state securities regulator, or the SEC, depending on the size of the adviser. If the SEC registers the investment adviser, you can get the Form ADV at a cost of 24 cents per page (plus tax and postage) from the SEC at

Office of Public Reference
450 5th Street, NW, Room 1300
Washington, D.C. 20549-0102
phone: (202) 942-8090
fax: (202) 628-9001
e-mail: publicinfo@sec.gov