A FINRA guide to what agencies regulate different types of financial professionals
Mass Affluent investors with a net worth between $100,000 and $1 million (not including primary residence) consider themselves fairly knowledgeable about investing, but admit that they have much to learn. Forty-five percent, according to Spectrem Group research, turn to their primary financial advisor to learn about investments. Approximately three-quarters of these investors use an advisor. Nearly one-quarter said that they rely on an advisor for certain and specific types of investments.
In seeking out an advisor, it is important to know who regulates them. Here, courtesy of the Financial Industry Regulatory Authority website, is a basic introduction to financial professionals and who regulates them. FINRA is an independent regulator that oversees nearly 4,560 brokerage firms, about 163,335 branch offices and about 631,305 registered securities representatives.
The Securities and Exchange Commission regulates investment advisers who manage $25 million or more in client assets, Advisors who manage less are regulated by the securities regulator for the state where the advisor has his or her principal place of business. The SEC’s Investment Advisor Public Disclosure database offers background information on both SEC- and state-registered firms. To do a background check on an individual, FINRA recommends contacting your state securities regulator. If the individual is also a registered representative, use FINRA BrokerCheck.
To become a Certified Public Accountant (CPA), an accountant must pass a national examination administered by the American Institute of Certified Public Accountants (AICPA) and meeting education and experience requirements set by the state Board of Accountancy where the accountant does business. Check your state’s Board of Accountancy to determine whether an accountant is licensed as a CPA. FINRA also recommends checking the government section of your phone directory to locate your state board or visit the AICPA’s website.
Each state has its own rules that govern whether and under what circumstances a person can practice law. Lawyers generally must pass a bar exam, a comprehensive and rigorous examination to the practice law. The American Bar Association does not regulate lawyers, but it can help you find out whether a lawyer is licensed.
Financial planners do not have their own regulatory agency. FINRA advises that individuals who call themselves financial planners may be regulated in relation to other services they provide: “For example, an accountant who prepares financial plans would be regulated by the state Board of Accountancy, and a financial planner who is also an investment adviser would be regulated by the Securities and Exchange Commission or by the state where the adviser does business.”