By doing business with a licensed broker, you’re protected by a web of
regulations and standards that are enforced by state, federal, and industry regulators.
For a person to work as a licensed broker, also known as a registered
representative,
he or she needs to undergo a professional background check
and pass a detailed securities exam administered by the Financial Industry Regulatory Authority (FINRA).
Once brokers are licensed, they’re required to meet stringent requirements,
including continuing education and disclosing important information, such as
their disciplinary history.
SIPC
You’re not insured against market risk — the chance that your investments
will drop in price — but if your brokerage firm is a member of SIPC, you
are protected if the firm goes out of business. SIPC works to return securities
and cash to eligible investors whose brokerage firms are in financial trouble.
So if the firm goes under, you don’t have to follow.
1.
You can request reports on specific brokers and brokerage
firms for free at www.broker
check.finra.org or from your state securities office. The information comes from
the Central Registration Depository, a public database.
2.
Look for the words “Member Securities Investor Protection Corporation” or “Member
SIPC” on ads and signs for a brokerage firm. You can also look up a firm
in the SIPC member database at www.sipc.org.
