Central Registration Depository (CRD)

The Central Registration Depository (also known as the CRD) is a massive digital filing cabinet for the financial industry. Run by the FINRA (Financial Industry Regulatory Authority) and the NASAA (North American Securities Administrators Association), this database contains the licensing and registration information for hundreds of thousands of financial professionals and their firms across the United States. Think of it as the ultimate background check tool for your stockbroker or investment advisor. The CRD holds a wealth of information, including a professional’s qualifications, employment history over the last 10 years, and—most critically for investors—a detailed record of any customer complaints, regulatory sanctions, or criminal history. For the average investor, this information is made publicly accessible for free through a user-friendly tool called BrokerCheck.

Value investing is fundamentally about due diligence and avoiding permanent loss of capital. As Warren Buffett famously said, “Rule No. 1: Never lose money. Rule No. 2: Never forget Rule No. 1.” While we often apply this wisdom to analyzing companies, it's just as crucial to apply it to the people we entrust with our money. An untrustworthy or incompetent advisor can sink your portfolio faster than a bad stock pick. Checking your advisor's CRD record via BrokerCheck is one of the easiest and most powerful ways to manage risk. It’s the equivalent of reading a company’s annual report before buying its stock. You wouldn't invest in a business without scrutinizing its management and track record, so why would you hand over your life savings to a stranger without doing the same? A clean record doesn’t guarantee great advice, but a history of customer disputes or regulatory fines is a massive red flag that you can spot in minutes.

While the CRD is the backend database, your window into it is FINRA's BrokerCheck website. When you look up an individual or a firm, you'll get a report that's easy to read but packed with vital details.

• Summary: Gives you an at-a-glance look at the broker's experience and a quick snapshot of any “disclosures” (i.e., black marks on their record).
• Employment History: Look for stability. A long history of jumping between firms every year or two can be a warning sign of issues.
• Exams Passed: This shows their professional qualifications. Common licenses include the Series 7 (General Securities Representative) and the Series 66 (Uniform Combined State Law Examination), which demonstrate a baseline of knowledge.
• Disclosures: This is the most important section. A “No” in every category is what you want to see. A “Yes” means you need to click and read the details immediately.

This section is where you find the dirt. Disclosures are events that regulators require to be reported. Don't just glance at them; understand what they mean.

• Customer Disputes: These are complaints filed by clients against the broker. Look for patterns. Are there multiple complaints about unsuitable investments, misrepresentation, or unauthorized trading? While a single, settled dispute isn't necessarily a dealbreaker, a series of them is a serious concern.
• Regulatory Actions: These are disciplinary actions taken by regulators like the SEC or FINRA. They can range from fines to suspensions and even a permanent ban from the industry. These are rarely minor issues.
• Criminal Disclosures: This includes any felony or certain misdemeanor charges and convictions. Financial-related crimes are obviously a “run-for-the-hills” signal.
• Financial Disclosures: Has the broker filed for bankruptcy or had significant financial liens? If someone has trouble managing their own finances, you should be very skeptical about their ability to manage yours.

Performing a background check is simple and should be a non-negotiable first step before hiring an advisor, and a good habit to check in periodically even after you have.

1. Go to the Website: Navigate to the official FINRA BrokerCheck website. It's free.
2. Search: You can search for an individual broker or an entire firm by name.
3. Use the CRD Number: Every registered individual and firm has a unique CRD number. If your advisor gives you this number, you can bypass any confusion with common names and pull up their exact record. If they are hesitant to provide it, consider that your first red flag.
4. Trust, But Verify: Even if an advisor is recommended by a trusted friend or family member, take the five minutes to run a check. It’s your money on the line.

The CRD system is an invaluable tool, but it's not perfect. In some cases, brokers can have customer complaints “expunged” or erased from their public record, which is a controversial practice. Furthermore, the CRD primarily covers brokers. Many fee-only financial planners are Registered Investment Advisers (RIAs) and may not be in the CRD database if they are registered only with state regulators. For these professionals, you should use the SEC's companion site, the IAPD (Investment Adviser Public Disclosure) website, which serves a similar function. Ultimately, the Central Registration Depository, accessed via BrokerCheck, is an essential, free resource for investor protection. Using it is a simple, powerful step in upholding the core principles of value investing: do your homework, protect your downside, and never, ever forget Rule No. 1.