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    How to Check Out a Broker

    How To Check Out A Broker Splash image

    There are several Web sites you can visit to find information about a particular broker. These fall into two camps: Those that can provide disciplinary information or complaints about a broker or firm, and those that can 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; their BrokerCheck service is governed by federal law, Securities and Exchange Commission (SEC) regulations, and NASD rules approved by the SEC. State disclosure programs are governed by state law, and may provide additional information on brokers licensed by the state.

    Background information from the NASD and from state securities regulators comes primarily from the Central Registration Depository System (CRD), a computerized database developed jointly by NASD and the North American Securities Administrators Association (the association of state securities regulators) that holds licensing and registration information on over 600,000 stockbrokers and 6,000 brokerage firms throughout the country. Every state securities regulator can access the CRD database.

    In addition to employment and examination history, the CRD report will contain the following types of disciplinary history, if applicable: final disciplinary actions 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; civil judgments and arbitration decisions involving public customers; criminal convictions or indictments against registered or licensed brokerage firms and their associated persons; settlements of $10,000 or more among the parties to arbitrations, civil suits, and customer complaints involving securities or commodities transactions; employment terminations after allegations were made involving violations of investment-related activities; bankruptcies filed within the last 10 years; pending disciplinary actions, arbitrations and civil proceedings.

    • National Association of Securities Dealers (NASD)
      Towards the bottom of the NASD homepage, click on the a NASD BrokerCheck button.

      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; the source of the information is the CRD. It also includes disclosure information reported by regulators. Information that has not been reported to the CRD, or that is not required to be reported or is no longer reportable on regulatory forms is not disclosed.

    • North American Securities Administrators Association (NASAA)
      The NASAA is an association of 50 state securities agencies responsible for investor protection. Click on the Find a Regulator Link on the homepage 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 CRD system, and may be able to supply you with additional regulatory action taken under state securities laws.

    Broker Ratings

    • AAII
      Our own on-line survey asks members to rate their brokers based on: quality of trade (price and speed), reliability and overall satisfaction. To view the ratings, go to the Member Surveys area and scroll down to the Discount Broker Survey.
    • Gómez
      Gómez was initially established to provide insight and advice to security brokerage firms seeking to improve their on-line offerings. In the process, Gómez created the Gómez Scorecard to define the elements of quality in the delivery of Internet-based services.

      At Gomez.com, click on Benchmarks and then Scorecards; from the pull-down menu select Broker-Discount or Broker-Full Service. The Scorecard presents the top 10 firms rated by overall score with a review of each. Brokers are additionally ranked by ease of use, customer confidence, on-site resources, relationship services and overall cost categories.