Your broker has a past, of course, and having a peek just got easier


THERE'S FINALLY a new, improved version of the creaky old CRD. If you're an investor and never heard of the CRD, it's time you learned.

The Central Registration Depository, started in 1980, contains your stockbroker's past. Brokers have to report their employment history for the past 10 years, certain customer complaints, pending arbitrations, certain legal problems and any actions taken against them by regulators.

Insurance agents should also have their histories in the CRD, if they sell variable annuities or variable life policies.

You can get free reports on brokers or agents by Web, phone or mail. Check them out, before starting a business relationship. If you didn't check before you started, do it now.

At the moment, investors don't have direct access to the new version of the CRD reports. But you have indirect access, through your state securities commissioner.

About 90 percent of the 600,000 active brokers in the CRD have clean records, according to NASD Regulation (NASDR, the regulatory arm of the National Association of Securities Dealers). The remaining 60,000 brokers, however, have been involved in incidents that you'd probably want to know about.

A single customer complaint doesn't mean that you're dealing with a rogue. But several complaints, arbitrations or financial settlements should warn you off.

The CRD is co-owned by NASDR and the North American Securities Administrators Association (NASAA).

The regulators started using the new Web CRD last month. They're facing the usual bugs and errors that inevitably mar a major software change. (On one broker's report, I found a single lawsuit reported as three separate complaints.) But once these problems are worked through, the states will be able to spot rogue brokers much faster than before.

Denise Voigt Crawford, Texas securities commissioner, says that, thanks to the new system, "I can ask for the name of every broker licensed in Texas who has at least five disciplinary incidents and get an instant printout." With the old CRD, it might have taken three months.

There's also a new state-to-state alert. Say that a California client complains about her broker. If that broker is also licensed in Texas, the complaint will pop up on the Texas regulators' screens. Bad brokers are going to find it harder to hide.

There's one big weakness in the CRD. It relies on brokers and their firms to tell the truth. Written customer complaints are supposed to go to the CRD within 30 days. "The best and most honest brokers report promptly. The rotten brokers thumb their noses at the CRD," says Christine Bruenn, the securities administrator in Maine. A broker might have a clean record only because he or she threw the complaints away.

If you make a written complaint against a broker, for a sales-practice violation (say, churning your account), wait six weeks and then check the broker's CRD report.

If your complaint isn't on the record, notify the NASDR and your state securities administrator.

To check out a broker on the Web, go to, then click on "About Your Broker." You'll see the broker's employment history and a list of the states where he or she is licensed to do business.

If the screen says there's also a "disclosure event," your broker has a potential black mark on the record. You cannot call it up yourself. Instead, you have to ask to see it. The NASD will ship it out to you by mail.

Why the roundabout route? Because current law shields the NASD from broker lawsuits only when negative information is disclosed by mail or fax. Eventually, Congress will pass a new law, protecting Web disclosure, too. When that happens, you'll be able to call up the negative information directly from home.

If you're not online, you can get a CRD report by calling the NASDR at 800-289-9999.

There are two little problems with these mailed reports:

First, they reflect the old version of the CRD. You get brief summaries of the complaints, which often are hard to understand.

Second, the NASDR doesn't always tell you everything it knows. For example, it won't disclose complaints that were settled for less than $10,000 after 24 months have passed.

Here's where your state securities commissioner comes in. States generally disclose the full CRD report. They'll also send you the new, improved version, which gives you a fuller and clearer description of the infraction or complaint.

Your state commissioner's phone number is available through NASAA at 202-737-0900.

Jane Bryant Quinn is one of the nation's best known syndicated personal finance columnists.

Washington Post Writers Group

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