Broker-dealers are regulated by state securities regulators and have to register with the Securities and Exchange Commission (SEC). Individual registered representatives—or stock brokers—generally work for broker-dealers. Stock brokers must be members of the Financial Industry Regulatory Authority (FINRA), pass a qualifying exam, and be licensed by the state securities regulator.

Before doing business with a broker-dealer or registered representative, it is a good idea to do a background check. You will want to find out if the broker-dealer or individual stock broker has had any licensing issues, disciplinary actions, or work history problems such as termination from a brokerage firm.

Fortunately, the various regulatory agencies make it easy for you to do this research. The North American Securities Administrators Association (NASAA) has an online tool that allows you to find your state's securities regulator. The Financial Industry Regulatory Authority (FINRA) maintains a computerized database called the Central Registration Depository (CRD) that has licensing and registration information on more than 6,800 broker-dealers and 660,000 active registered individuals nationwide. You can access the database free of charge or for a small fee through your state securities regulator. Incidentally, brokers are not notified when this information is accessed. The CRD allows you to find out about an individual broker's employment history for the past 10 years, securities examination scores, licensing or registration status, and any disciplinary history. You also can also find a lot of information about brokerage firms through the CRD.

Another way to check your broker's background is by requesting a report through your state securities regulator. To find the one in your state, visit NASAA’s “Contact Your Regulator” Web site. FINRA also offers the BrokerCheck program, which allows you to access a broker's licensing and registration information, as well as disciplinary history, free of charge. Similar to a CRD report, a BrokerCheck report includes the same basic information. FINRA also makes it possible for you to search for information about investment adviser firms, which are regulated by and registered with the SEC or through state regulators.