Is Your Registered Investment Advisor Legit?

Stockbroker Law - Friday, May 27, 2011
Is Your Registered Investment Advisor Legit?

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 requirement.


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 victimized customers.


We offer a free initial consultation to investors who feel they have been victimized by a dishonest investment advisor.



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