For the past ten years tens of thousands of
stockbrokers have left brokerage firms to become independent registered investment advisors. So
what’s the difference?
Stockbrokers are required to be registered with the
Financial Industry Regulatory Authority, a self-regulatory existing under the auspices of the Securities
and Exchange Commission. FINRA maintains a comprehensive set of rules of conduct which
stockbrokers are required to follow, specific rules which independent registered investment advisors are
not necessarily required to follow. These rules include specific rules required to follow to
safeguard client funds, fidelity bonding requirements, supervision requirements and compliance related
requirements which independent registered investment advisors are not required to follow.
Further, while stockbrokers are required to submit
customer claims to arbitration before the Office of Dispute Resolution of the National Association of
Securities Dealers, independent registered investments advisors are not required to follow these rules
which require the submission of customer claims to arbitration.
If you have a dispute with your independent registered
investment advisor, you may be required to pursue your remedies in court with all the attendant costs
for stenographic fees, court fees, appellate fees and the like, as opposed to the arbitration
process. In certain circumstances, however, you may be able to have your grievances heard in
arbitration if your contract with your registered investment advisor contains an arbitration
The supervisory and regulatory review of the activities
of registered investment advisors, in many circumstances, is a lot less strict than that for
stockbrokers. For starters, registered investment advisors, working out of a home office for
example, are oftentimes not subject to the daily scrutiny and review which many stockbrokers are subject
to. Further, depending upon certain waivers, exemptions and grandfathering provisions, many registered
investment advisors are not even required to take and successfully pass the competency examinations
required for stockbrokers.
Independent Registered Investment Advisors are not
required to carry professional liability insurance and often times have no financial backing or assets
that a victimized investor may look to seek recovery upon in the event that their trust and confidence
has been abused. Many investors have lost their life savings at the hand of independent registered
investment advisors only to find out that these advisors have no assets or financial means to compensate
We offer a free initial consultation to investors who
feel they have been victimized by a dishonest investment advisor.
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