How to Check Out a Broker

    How To Check Out A Broker Splash image

    Broker information on the Web can be divided into two camps: Sites that provide disciplinary or background information about a broker or firm, and sites that provide customer evaluations of brokerage firms.

    Background Checks

    Background checks of individual brokers or brokerage firms should be made by using both the NASD BrokerCheck and by requesting information from your state securities regulator. The National Association of Securities Dealers (NASD) regulates brokerage firms and their employees. State disclosure programs may provide additional information on brokers licensed by the state. You also should check to make sure that your broker is covered by SIPC (Securities Investor Protection Corp.) insurance—for more on this see the box on page 21.

    National Association of Securities Dealers (NASD)
    Under Investor Information on the right-hand side of the NASD home page, click NASD BrokerCheck. NASD BrokerCheck provides information on NASD-registered firms and their brokers that is required to be reported on the approved industry registration and licensing forms. It also includes disciplinary and disclosure information reported by regulators.

    North American Securities Administrators Association (NASAA)
    The NASAA is an association of 50 state securities agencies. Click on the Contact Your Regulator link on the home page to obtain the address, telephone and Web site of your state regulator. Your state securities regulator can tell you if the broker is properly licensed within your state, can access the central brokerage registration database, and may be able to supply you with additional regulatory action taken under state securities laws.

    Securities Investor Protection Corp. (SIPC)
    Under Who We Are, click on Member Database to make sure a brokerage firm is an SIPC member.

    Broker Ratings

    Our own on-line survey asks members to rate their brokers based on: trade price and speed, reliability and overall satisfaction. To view the ratings, go to the Investor Surveys section under Tools in the left-hand column, and then click on the On-Line Discount Broker Survey.

    Gómez helps businesses measure and improve their on-line offerings. In the process, Gómez created the Gómez Performance Indices (GPI). At, click on the Performance Strategies tab and select Benchmarking, then select US Brokerage: Discount—Generate Order from the list. The Brokerage Generate Order Benchmark presents the top 14 firms rated by response time, availability, and consistency.

    J.D. Power and Associates
    Two Customer Satisfaction surveys conducted in 2006 cover eight on-line brokerage firms and 13 full-service brokerage firms. Customers were asked to rate the firms on a variety of issues including cost, customer service, trade execution, information resources, Web site capability (for the on-line broker survey) and account management and the representative/advisor (for the full-service broker survey). At the home page, click the Finance & Insurance tab.
    Keynote helps businesses measure and improve their on-line offerings. In the process, Keynote created the Keynote Broker Web Transaction Performance Index, which shows the average response times and success rates for 12 major brokerage Web sites. At the home page, go to the Performance Indices link, click on Industry Indices, and then click on Broker Web Sites.
    The Kiplinger broker survey compares 11 large brokerage firms. Ratings are based on your answers to questions covering elements such as commissions and fees, broker responsiveness and knowledge, mutual fund programs, and Web site ease and usefulness. At the main page, click on Tools & Calculators, and then click on “Which on-line broker is best for me?” under the Stocks or Funds tools.