Investment Adviser Public Disclosure (IAPD)

The Investment Adviser Public Disclosure (IAPD) system is a free online database that provides registration information for investment advisory firms and individual investment adviser representatives. Think of it as the financial world’s version of a background check, or perhaps more like a dating profile where they’re legally required to list all their bad habits. Maintained by the SEC (U.S. Securities and Exchange Commission) and state securities regulators, and operated by FINRA (Financial Industry Regulatory Authority), the IAPD website is your first line of defense before entrusting someone with your hard-earned capital. It allows you to peer into the professional life of an adviser or firm, revealing their employment history, licenses, and, most importantly, any past disciplinary actions or “disclosure events.” For any investor, but especially for a value investor focused on capital preservation, running a quick check on IAPD is a non-negotiable step in your due diligence process.

Warren Buffett’s famous first rule of investing is: “Never lose money.” His second rule is: “Never forget rule No. 1.” One of the fastest ways to lose money has nothing to do with market fluctuations and everything to do with the people you trust. Handing your money to an adviser with a history of regulatory sanctions, customer complaints, or financial irresponsibility is like building your castle on a foundation of sand. Using IAPD is a fundamental exercise in risk management. It helps you protect your principal by weeding out individuals or firms with checkered pasts. A true value investor knows that managing risk is paramount, and that begins with carefully selecting the partners and professionals you work with. Before you analyze a single stock, you must first analyze the integrity and competence of the person guiding your decisions. IAPD is the tool for that initial, critical analysis.

When you pull up a report on an individual or a firm, it can seem overwhelming. Focus your attention on these key areas.

Look at the adviser’s employment history. Are there large, unexplained gaps? Have they bounced between many different firms in a short period? While not necessarily a red flag on its own, a volatile work history might warrant a question. You can also verify their current employment and see what licenses they hold, such as the Series 7 or Series 66, which indicate the types of products they are qualified to sell or advise on.

This is the most critical part of the report. A “disclosure” is a fancy word for something in an adviser's past that regulators think you should know about. Click on the “Yes” links to see the details. Look for:

• Criminal: Has the adviser been convicted of or pleaded guilty to a felony or a significant investment-related misdemeanor?
• Regulatory Actions: Have regulators like the SEC or FINRA ever fined, suspended, or barred this individual for misconduct?
• Civil Judicial: Are there any investment-related civil lawsuits where a court found against the adviser?
• Customer Complaints: This is a big one. It details formal complaints from clients, the nature of the allegations (e.g., unsuitability, misrepresentation), and how they were resolved. A long history of complaints is a major red flag.
• Terminations: Was the adviser ever fired or permitted to resign from a firm after being accused of violating rules, fraud, or failing to supervise others?
• Financial: Has the adviser ever declared bankruptcy or had significant liens or judgments filed against them? This could suggest financial stress, which might tempt an adviser to take unnecessary risks with client money.

Getting this vital information is surprisingly simple.

1. Go to the IAPD website (adviserinfo.sec.gov).
2. Choose your search: You can search for an “Individual” (the specific adviser) or a “Firm.”
3. Enter the name or CRD number: Every adviser and firm has a unique Central Registration Depository (CRD) number. If you have it, it’s the most precise way to search. If not, a name and location usually works.
4. Review the reports: For a firm, you'll see their Form ADV, which is their official registration document. For an individual, you’ll see a summary of their record, which is compiled from their Form U4.

Always, always run this check before signing any paperwork or writing a check.

While IAPD is a powerful tool, it requires context. A single, minor customer complaint from 15 years ago that was denied is very different from a recent pattern of regulatory fines for fraud. Don't be afraid to ask the adviser directly about any disclosures you find. Their willingness to discuss it openly and honestly (or their defensiveness) can be as revealing as the disclosure itself. IAPD is your starting point for due diligence, not the final word. But it's a step that no prudent investor should ever skip.