It’s important to check out the background of your broker or financial advisor, just like you would any profes sional. Unfortunately, there are a number of different regulatory agencies that oversee brokers, advisors and insurance agents, and it’s not always easy to be sure you’re going to the right place, or getting the relevant information. Here’s a short primer.
The primary organizations involved with registration and oversight of financial professionals in South Carolina are the Securities and Exchange Commission, the Financial Industry Regulatory Authority, or FINRA, the Securities Division of the South Carolina Attorney General’s office and the South Carolina Insurance Commission. Individuals involved in the sale of financial products and services to the public may be required to registered with one, two, or in some cases all of these entities, depending on the type of business they conduct. If your broker or advisor is involved in the sale of securities in any way, including variable annuities, they must be registered with FINRA. If they sell insurance and fied annuities as well, they must also be licensed by our State Insurance Commission. If they give investment advice for a fee, and manage more than $100 million dollars, they must be registered with the U.S. Securities and Exchange Commission; If less than $100 million, the Securities Division of the South Carolina Attorney General’s office.
FINRA, or the Financial Industry Regulatory Authority, is an independent non-profit organization authorized by Congress to write and enforce the rules that cover securities firms and brokers, and provide a mechanism for ongoing examination of those firm and brokers for compliance. Their responsibilities include making sure that individuals who sell securities are tested, qualified and licensed, that securities advertisements are truthful and straightforward, that investments sold to an individual are suitable for that investor’s needs, and that investors receive complete disclosure about investments they purchase.
You can obtain a background check by going to FINRA.org, clicking on the “Individuals” tab, and typing in the name of your broker in the broker check window. You’ll need to be sure you have the name spelled correctly, along with any middle name or initials. You can also go to the “Firm” tab and view information about their company. If your broker is properly licensed to sell securities, their name will appear, with a summary screen which lists their experience in the securities industry, who they are employed by, who they previously worked for, where they are registered to do business, and the examinations they have passed that are current. You will see if they are registered only as a broker who sells securities, or also as an investment advisor who provides investment advice for a fee. However, this site will provide information on their activities as a broker.
If this individual has any disclosure events you will see a notation. A disclosure event includes information about client disputes, disciplinary actions and financial matters on the broker’s record. You can click on the “detail” icon to see a complete report of these activities. Any disclosure events will have a record of the event or complaint, a short summary of the circumstances, sometimes the amount of money involved, and the disposition of the item, whether dropped, or settled.
If your advisor is a registered investment advisor as well, you will see a link connecting you to the “Investment Advisor Public Disclosure Report,” on the U.S. Securities and Exchange Commission website. This will list any disclosure items having to do with their activities as an investment advisor. Again, you have a summary page and a more detailed report, with any material events noted.
Investment advisors are also required to file and annually update a two-part form known as an ADV. This form is the primary registration document for an investment advisor, and gives detailed information about a firm s investment approach, fees, size, and compliance history. This form is available for you to view online by going to the SEC website advisor search page, www.adviserinfo.sec.gov/IAPD/Content/Search/iapd_Search.aspx. You can then enter the firm or individual’s name and follow the link to a complete copy of their ADV form.
Insurance agents, no matter what type of insurance they offer, are regulated by the state, through an extensive examination and continuing education process. To confirm that an insurance agent is properly licensed in South Carolina, go to www.doi.sc.gov, click on “online services,” then “search SCDOI database. “ Enter the name of the agent or firm you are researching, and their details will come up. No compliance or complaint information is available, but you can see if the individual is properly licensed. For additional information, the phone number for the Department of Insurance Consumer Services is 803-737-6180.
Steven Weber, Gloria Harris, and Frank Weber are the investment and client services team for The Bedminster Group, providing investment management, estate, and financial planning services. The information contained herein was obtained from sources considered reliable. Their accuracy cannot be guaranteed. The opinions expressed are solely those of the authors and do not necessarily reflect those from any other source. Discussion of individual stocks are informational and do not constitute recommendations to purchase.
