Ask and Check
Many financial scams involve unlicensed individuals selling unregistered investments—ranging from stocks, bonds, and oil or gas deals to fictitious instruments, such as prime bank investments. That's why it is particularly important to "Ask and Check" about investments and investment professionals before you invest. Regardless of your trust or ties, or prior dealings with the professional, do your homework.
Check Out the Seller
If a salesperson is trying to sell you an investment, check them out by following these steps.
Step 1: Ask "Are you licensed to sell me this investment?"
Legitimate investment professionals—including registered financial professionals (also known as registered representatives), investment advisers and insurance agents—must be licensed with the Financial Industry Regulatory Authority (FINRA), the Securities and Exchange Commission (SEC) or your state securities or insurance regulator before they can sell you anything. If they say they aren't licensed, say good bye—and don't buy.
Step 2: Check.
If they say they are licensed, check them out as follows:
|If They Say They Are a ...||Look Here||Helpful Hints|
|Registered Financial Professional||
FINRA BrokerCheck Tips
Here are some helpful tips when checking out a salesperson using FINRA BrokerCheck:
How to search BrokerCheck: You may search for a person by name, CRD/SEC Number, employing firm or zip code.
If your Search returns too many results: You can narrow the search results you get by adding one or more of the search criteria noted above.
If you don't find the person in FINRA BrokerCheck (your search comes back as “No Search Results”), it can mean:
- The person’s name is misspelled. You can refine your search by entering only part of the person’s name.
- The individual is not included in BrokerCheck or the Securities and Exchange Commission’s Investment Adviser Public Disclosure database because he or she:
- is not currently registered with FINRA or a state securities regulator, or has not been so registered within the last 10 years; or
- has not been registered with FINRA or a state securities regulator within the last 10 years and either:
- is not the subject of a final regulatory action;
- has not been convicted of or pled guilty or no contest to certain crimes;
- has not been subject to a civil injunction involving investment-related activity or been found in a civil court to have been involved in a violation of investment-related statutes or regulations; or
- has not been named as a respondent or defendant in an arbitration or civil litigation in which he or she was alleged to have committed a sales practice violation, and which resulted in an award or civil judgment against the individual.
- The investment adviser firm is not within scope for the Securities and Exchange Commission’s Investment Adviser Public Disclosure database because the firm is not currently registered with the SEC and/or a state securities regulator or been so registered within the last 10 years.
If you are still not able to find the person you’re searching for, please call the FINRA BrokerCheck Hotline at (800) 289-9999 and speak with a representative.
Check Out the Investment: Is It Registered with the SEC?
Take these steps to check whether a recommended investment is registered with the Securities and Exchange Commission (SEC):
Step 1: Ask the person offering the investment, "Is this investment registered with the SEC?"
If the answer is no, ask why the investment is not registered. Not all securities offerings must be registered with the SEC—such as those issued by municipal, state and federal governments. The SEC also provides exemptions for certain intrastate offerings and small public and private offerings under a rule known as Regulation D. For more information, read the SEC's Microcap Stock: A Guide for Investors.
Step 2: If yes, then use the chart below to help you check that this is in fact the case.
|Where to Check||What You Get||Helpful Hints|
Call the SEC's Office of Investor Education and Advocacy toll-free at (800) SEC-0330 if you have trouble using EDGAR or have questions about a company or investment.
Your State Securities Regulator
Keep in mind that registration with the SEC does not guarantee that an investment will be a good one or immune to fraud. Likewise, lack of registration does not mean the investment lacks legitimacy. The critical difference is the extreme level of risk you assume when you invest in a company about which little or no information is publicly available. SEC registration carries a number of advantages for investors, including disclosure of financial and other information that can help investors assess whether to invest in a company's securities.
To check out the registration of the following types of investments, follow these steps:
|Visit the SEC's EDGAR Mutual Fund Search. If you find the mutual fund there, then it is registered with the SEC.|
Variable Insurance Products
|Visit the SEC's EDGAR Variable Insurance Product Search. If you find your variable annuity or other insurance product, then it is registered with the SEC.|
Exchange-Traded Funds (ETFs)
Exchange-Traded Notes (ETNs)
|Visit FINRA Market Data. Click on the link that says Company Information in the far left column to search for your investment. If you find the ETF, ETN or closed-end fund on Market Data, it is registered with the SEC.|