Investigating Stockbrokers and Financial Advisers by Rob Wells


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Rob Wells, former Wall Street Journal/Dow Jones newswires deputy chief, presents "Investigating Stockbrokers and Financial Advisers," a free, one-hour webinar hosted by the Donald W. Reynolds National Center for Business Journalism.

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Investigating Stockbrokers and Financial Advisers by Rob Wells

  1. 1. Title Slide Inves&ga&ng   Stockbrokers  &   Financial  Advisers  
  2. 2. Poll  Ques&on  #1   Have  you  researched  a  stock   broker’s  records?   • Yes   • No  
  3. 3. •  Unsuitable   Investments     •  Churning     •  10b5     •  Breach  of  Fiduciary   Duty   Photo  by  Flickr  user  Victoria  Reay   Red  Flags  
  4. 4. Research  Brokers,  Advisers FINRA  BrokerCheck     -­‐-­‐Records  on  637,000  current  and  former  professionals,  4,700  firms.       SEC’s  Investment  Adviser  Public  Disclosure  (IAPD)   -­‐-­‐25,000  professionals     Cer&fied  Financial  Planner  Board  of  Standards  Inc.   (CFP)   -­‐-­‐69,000  professionals    
  5. 5. FINRA  BrokerCheck FINRA  (Financial  Industry  Regulatory   Authority):    Industry  group  that  licenses   and  polices  stock  brokers.     FINRA:  An  SRO.  Works  with  and  is   overseen  by  SecuriVes  and  Exchange   Commission  
  6. 6. FINRA  BrokerCheck Quick  Ques&on:    Ever  heard  of  CRD?    Type  Y/N  or  the  defini&on     Data  derived  from  CRD:     Central  RegistraVon  Depository   Launched  1981    
  7. 7. First  Screen
  8. 8. Star&ng  Your  Search Having  a  CRD  number  speeds  your  search.   CRDs  available  on  complaints,  arbitraVon   records   Click  for  person  
  9. 9. Get  Full  Name,  Middle  Ini&al,  Etc.   Get  Full  Name  of  Your  Broker.  Thousands   of  people  in  database,  may  take  Vme  to   find  right  person.  Filter  with  Zip  Code  
  10. 10. Quick  Chat:  IdenVfy  the  RED  FLAG  in  this  filing.       Answer:  NOT  REGISTERED.  WHY?  
  11. 11. Your  Turn   Time  for  some  repor&ng…  
  12. 12. Search:  “Bernard  Madoff”   Go  to  a  separate  tab  on  web  browser  and   pull  up  this  link: h_p://   Photo  by  Flickr  user  Petezin  
  13. 13. The  document  
  14. 14. Which  secVon  has  the  juiciest  details?   •  Report  Summary   •  Broker  QualificaVons   •  RegistraVon  and  Employment   History   •  Disclosure  Events   Poll  Ques&on  #2  
  15. 15. For  Firms:   • Overview  of  the  firm,  and  ownership   • History,  including  any  mergers  or  name  changes   • Summary  of  firm’s  operaVons,  list  of  fines,  regulatory  acVons,   arbitraVon  awards     For  Individuals:   • Broker  credenVals,  current  registraVons,  licenses  and  exams   • Employment  history  for  the  past  10  years   • Any  customer  disputes  or  regulatory  events  on  the  broker’s   record.   Key  Items  on  CRD  Reports  
  16. 16. Employment  History  
  17. 17. Details  of  Ac&on   Get  source  material   Details  of  Case  
  18. 18. Quick  Chat  Ques&on   Type  a  word  or  phrase  into  the  chat  box:   Describe  other  ways  to  use   Broker  Check  as  a  repor&ng  tool.  
  19. 19. Backgrounding   Source:  The  Washington  Post  
  20. 20. Contact  Former  Co-­‐Workers:  Work  History  
  21. 21. Double  Check  BrokerCheck:   Full-­‐Text  of  Arbitra&on  Filings:   hep://   -­‐-­‐Material  linked  in  BrokerCheck  but  worth  searching.     Finra  Disciplinary  Ac&ons  Database  (FDA):   hep://    -­‐-­‐Material  summarized  in  BrokerCheck,  access  to  raw   complaints  
  22. 22. BrokerCheck  to  Cover  Poli&cs     Chat  Box  Ques&on:   Poli&cians  Who  Were  Brokers?  
  23. 23. Your  Turn:  Search  “Jon  Corzine”  
  24. 24. FINRA:  Not  Perfect!  
  25. 25. Red  Flags   •  ArbitraVon  cases.  What   happened?       •  Employment  history.   RegistraVon  gaps;  where  were   they?     •  Brokers  can  peVVon  to  remove   arbitraVon  cases. Photo  by  Flickr  user  Victoria  Reay  
  26. 26. Investment  Adviser  Public  Disclosure   hep://    
  27. 27. What  Is  An  Investment  Adviser?   •  An  arbitrary  term  for  a  money  manager   •  Same  as  a  financial  adviser   •  A  unlicensed  Wall  Street  person   •  All  of  the  above   •  None  of  the  above   Poll  Ques&on  #3  
  28. 28. Regulated  by  SEC  or  states     Dodd-­‐Frank  Act:  Boosts  states'  role  in  regulaVng  advisers     •  States  regulate  advisers  handling  between  $25  million  and  $100   million  of  assets  under  management.     •  SEC  oversees  handling  assets  of  $110  million     •  Both  can  be  found  in  Investment  Adviser  Public  Disclosure   database.   Investment  Advisers  
  29. 29. Form  ADV   Main  Disclosure  Form  for  Investment  Advisers     • Part  1:  Summary  of  adviser's  business,  complaints   from  customers.       • Part  2:  Brochure  to  clients  ,  details  adviser’s   business  pracVces,  fees,  conflicts  of  interest,  and   disciplinary  informaVon
  30. 30.  State  securi&es  regulators   North  American  Securi&es  Administrators   Associa&on     •  Always  worth  checking  with  state  regulators     •  Great  way  to  monitor  local  and  naVonal  trends  
  31. 31. State  Enforcement   hep://­‐acVvity/enforcement-­‐legal-­‐acVvity/enforcement-­‐directory/    
  32. 32. NYT  story   on  LPL   Financial  -­‐-­‐   Uses  state   regulators  as   sources   hep://  
  33. 33. Cer&fied  Financial  Planners   •  CFP  ®  designaVon   •  Must  pass  series  of  exams   •  Subject  to  oversight  of  CerVfied  Financial   Planners  Board   •  Investor  complaints  can  lead  to  CerVfied   Financial  Planner  revocaVon  
  34. 34. CFP  Board  website  lists  revoked  planners  by  state  
  35. 35. Search  for  a  Cer&fied  Financial  Planner   hep://­‐an-­‐individual-­‐s-­‐cfp-­‐cerVficaVon-­‐and-­‐background  
  36. 36. Example  of  Disciplinary  Record  
  37. 37. Chat  Box:  Number  of  CFP   RevocaVons  in  Maryland?     hep://­‐cfp-­‐board/ethics-­‐ enforcement/disciplined-­‐individuals-­‐by-­‐state     Your  Turn  
  38. 38. Alphabet  Soup:     Financial  Professional  Titles   “The  requirements  for  obtaining  and   using  these  &tles  vary  widely,  from   rigorous  to  nothing  at  all.”    -­‐-­‐  SEC     hep:// AccreditedDesignaVons/  
  39. 39. Rob  Wells     University  of  Maryland,     Philip  Merrill  College  of   Journalism   Ques&ons?   Photo  by  Flickr  user  Xurble