Advertisement
Financial Planning

Checking Online Brokerage Firms

How can I find out if an online brokerage firm is legitimate?

I've been searching for a low-cost online brokerage firm to work with, and some of the ones I've come across don't sound familiar. How can I find out if a firm is legitimate?

You're smart to ask questions and investigate because tech-savvy crooks often create Web sites that look like legitimate businesses. Start with the NASD, the brokerage industry's self-regulatory body. On its Web site, you'll find a summary of a company's Central Registration Depository (CRD) report, which contains disciplinary and regulatory actions, settlements and complaints. To bring up the information, type the firm's name into the NASD's BrokerCheck. You'll be able to see where the firm is licensed, how long it's been in business and whether any disciplinary actions have been taken, as well as other information.

Advertisement - Article continues below

You also can search for information about individual brokers at the site, too. For more advice, see the NASD's How to Avoid Problems With Your Broker.

Also see if the brokerage is insured by the Securities Investor Protection Corp. (SIPC), which insures securities in customer accounts up to $500,000, including $100,000 for cash claims, should the brokerage fail. It does not insure against losses stemming from market declines. SIPC's main Web site also includes other helpful information and resources for avoiding problems with your broker. Also check out SIPC's warning about brokerage identity theft scams.

Another option is to check out the firms we've chosen for our Which Online Broker is Best for You? tool, where you can search for brokerage firms based on a broad array of criteria, such as fees, number of funds, or overall rankings.

Advertisement
Advertisement

Most Popular

8 Things You Must Know About Retiring to the Carolinas
retirement

8 Things You Must Know About Retiring to the Carolinas

From the mountains to the beaches, North Carolina and South Carolina offer retirees plenty of incentives.
August 14, 2020
What Trump's Payroll Tax Cut Will Mean for You
Tax Breaks

What Trump's Payroll Tax Cut Will Mean for You

President Trump issued an executive order to suspend the collection of Social Security payroll taxes. How much could it save you?
August 13, 2020
7 Surprisingly Valuable Assets for a Happy Retirement
happy retirement

7 Surprisingly Valuable Assets for a Happy Retirement

If you want a long and fulfilling retirement, you need more than money. Here are the most valuable retirement assets to have (besides money), and how …
August 3, 2020

Recommended

The Strange Psychology of COVID-19 and Investor Behavior
investing

The Strange Psychology of COVID-19 and Investor Behavior

Investors have a new set of behavioral trapdoors to avoid. Knowing what these unconscious, and often irrational, tendencies are, and why we sometimes …
August 11, 2020
The Scary Costs of Fight-or-Flight Investing
investing

The Scary Costs of Fight-or-Flight Investing

Understanding the fear factors that trigger dire moves can help you stick with your plan.
August 11, 2020
The 7 Types of Financial Procrastinators: Which One Are You?
investing

The 7 Types of Financial Procrastinators: Which One Are You?

The pursuit of investment perfection drives far too many people into getting nothing done, and that comes at a cost.
August 10, 2020
Invest Your Conscience with Ethical Trading Apps
investing

Invest Your Conscience with Ethical Trading Apps

From Betterment to Ellevest and Weathsimple, socially responsible investing apps are gaining steam. And those worried they’d have to sacrifice returns…
August 8, 2020