Federal or state securities laws require brokers, advisers, and their firms to be licensed or registered, and to make important information public. But it’s up to you to find that information and use it to protect your investment dollars. The good news is this information is easy to get, and one phone call or web search may save you from sending your money to a con artist, a bad broker, or disreputable firm.
This is very important, because if you do business with an unlicensed securities broker or a firm that later goes out of business, there may be no way for you to recover your money—even if an arbitrator or court rules in your favor.
INVESTMENT ADVISERS.
People or firms that get paid to give advice about investing in securities must register with either the U.S. Securities and Exchange Commission (SEC) or the State Securities Regulator where they have their principal place of business. Investment advisers who manage $25 million or more in client assets generally must register with the SEC. If they manage less than $25 million, they generally must register with the State Securities Regulator.
Some investment advisers employ investment adviser representatives, the people who actually work with clients. In most cases, these people must be licensed or registered with your State Securities Regulator to do business with you. So be sure to check them out.
To find out about advisers and whether they are properly registered, read their registration forms, called the “Form ADV,” which has two parts. Part 1 has information about the adviser’s business and whether they’ve had problems with regulators or clients. Part 2 outlines the adviser’s services, fees and strategies. Before you hire an investment adviser, always ask for and carefully read both parts of the ADV.
You can view an adviser’s most recent Form ADV online at www.adviserinfo.sec.gov. The database contains Forms ADV only for investment adviser firms that register electronically using the Investment Adviser Registration Depository, but will expand to encompass all registered investment advisers—individuals as well as firms. You can also get copies of Form ADV for individual advisers and firms from the investment adviser, your State Securities Regulator (page 16), or the SEC, depending on the size of the adviser. To contact your State Securities Regulator go online to www.nasaa.org. If the SEC registers the investment adviser, you can get the Form ADV for $ .24 per page (plus postage) from the SEC.
WRAP UP.
Stocks—whether they are purchased individually or through stock mutual funds— offer the best opportunity for long-term gains. Careful research and continued attention to your diversified portfolio, tempered by patience can help you achieve your investing goals.
STATE SECURITIES REGULATORS
State Securities Regulators have protected investors from fraud for nearly 100 years. Securities markets are global but securities are sold locally by professionals who are licensed in every state where they conduct business. State Securities Regulators work within your state government to protect investors and help maintain the integrity of the securities industry.
Your State Securities Regulator can:
- Verify a broker-dealer or investment adviser is properly licensed;
- Provide information about: prior run-ins with regulators that led to disciplinary or enforcement actions; serious complaints that may have been lodged against them; their educational background and prior work history
- Provide a computer link or telephone number or address where you can file a complaint; and
- Provide non-commercial investor education and protection materials.
For contact information for your State Securities Regulator, visit the North American Securities Administrators Association (NASAA) Web site at www.nasaa.org and click on “Contact Your Regulator.