Selecting a Stockbroker—Part V

Hector Rojas, Spring 2017 Student Intern


We have covered a lot of information in this series. Regardless of if you’re just joining us or have been with us since part one of this series, here is a brief review of what we have discussed thus far. In part one of this series, we discussed who a broker is. There we learned that brokers execute orders on behalf of their clients and are paid a commission of the sale. Additionally, we discussed the two general categories of brokers and why this matters to investors.

In part two of this series, we discussed the role of the broker, who governs brokers, and by what standard their conduct is governed. The takeaway point of part two is that investors should be aware that their brokers are under an obligation to know their customers and to only make a recommendation after having a reasonable basis to believe that a product is suitable for them.

In part three of this series, we tied together all of these concepts and informed our readers of the significance of properly vetting their broker. We discussed that a potential benefit of taking the time to get to know your broker through independent research is minimizing the potential for broker misconduct and investor fraud.

In part four of this series, we offered various tools to help you learn more about your broker and the firm for which they work. In the last and final part of this series we will discuss some of the tips the Securities and Exchange Commission has provided to help investors when selecting their broker.

SEC’s Tips for Selecting a Financial Professional

  1. Make sure the financial professional is licensed.

 According to the SEC, always check the background of any financial professional on to make sure the person is licensed, either as a broker or under another type of license, like as an investment adviser. Unlicensed, unregistered persons commit much of the investment fraud in the United States.

  1. Find out if the products and services available are right for you.

As we have already discussed, brokers may only recommend products that are suitable to the needs of their clients. Here, the SEC reminds investors to properly research the professional they will be conducting business with (who may or may not be a broker).

  1. Understand how you’ll pay for services and products, and how your professional gets paid as well.

This concept tracks back to what we have previously mentioned in this series. Here, the SEC reminds investors to inquire about the different alternatives available to pay for a particular service. The SEC warns that it is important to keep this in mind because fees can add up, and in the end take away from the profits you otherwise could be making from your investments.

  1. Ask about the financial professional’s experience and credentials.

Do not accept a professional designation as a badge of knowledge without knowing what it means, and beware of false or exaggerated credentials. To learn more about professional designations, which go far beyond brokers, visit FINRA’s Professional Designations page.

  1. Ask the financial professional if he or she has had a disciplinary history with a government regulator or had customer complaints.

We already discussed how FINRA’s Broker Check program discloses this information to the public. The SEC, however, advises investors to also check the background of their financial professional on

For more information on the SEC’s tips, click here.


Here at the clinic, our primary responsibility is representing investors who have suffered losses resulting from broker misconduct but cannot afford or find private legal representation because of the size of their claim. We strive to provide small investors with a voice regardless of the size of their claim.

In addition to this, however, we also endeavor to educate investors. Our goal is to develop informational resources, such as this blog, for investors to make informed investment decisions and avoid investor fraud. I hope you find the information in this series helpful and that you become a more prudent investor as a result.