Getting to Know Your Financial Advisor

Regulators have been concerned at the lack of transparency that plagues the financial system and allows for the perpetration of fraud by the likes of Bernie Madoff and others. Consequently, during the middle of 2010, the Securities and Exchange Commission (“SEC”) made changes to Part 2 of Form ADV. This is known as the “Brochure Supplement” and it requires that each advisor provide a resume to clients. The advisors must include information about their educational background, work experience, and disciplinary history.

Some of this information is already contained on the website maintained by the Financial Industry Regulatory Authority’s (“FINRA”) website. However, most investors have never heard of FINRA and do not know that they can obtain information about their brokers on the website. The new resume requirement of Form ADV only requires the advisor to notify investors of the fact that there was a disciplinary event and provide a link to the website that will provide information about the disciplinary action. It is then left to the individual investors to learn more about the disciplinary action through the FINRA website.