Brokers are people in the business of selling stock to investors. They are generally different from "Dealers," who buy and sell stock for themselves, though "Broker-Dealers" do both.
To do background research on Brokers .
(a) Get the broker's Form BD, "Uniform Application for Broker-Dealer Registration," by sending a request to the SEC at publicinfo@sec.gov. [Note: You can buy Form BDs filed with the SEC from 1979 through 2000 faster by calling ThomsonReuters Custom Research Services (formerly Disclosure) at 301-545-4930 (direct to D.C.) or 800-638-8241 (the toll-free main number)];
(b) Search a good news database for articles (for database suggestions, see the "News - Newspapers & Magazines - Articles" entry in this Guide);
(c) Search the FINRA BrokerCheck database [Caveat: The data may go back only to 2007] and/or call the BrokerCheck Hotline (800-289-9999);
(d) Search for arbitration awards using the databases discussed in the Awards section of the "Arbitration, Mediation and Alternative Dispute Resolution" entry in this Guide.
(e) Search the Internet with a good search engine to see if anything comes up.
(f) Search the National Futures Association's BASIC database.
(g) Search a database of SEC filings to see if anything comes up (see the Filings section of the "Securities and Exchange Commission" in this Guide).
(h) Call the appropriate state agency (in New York it's the Investor Protection Bureau, 212-416-8222).
Futures Brokers: Futures brokers are regulated by the National Futures Association, rather than the SEC. You can check for disciplinary actions through the National Futures Association's Background Affiliation Status Information Center. For more information, check out the NFA Web site.
Investment Advisors: If the broker is also an investment advisor, or works for an investment advisory firm, see also the entry for "Investment Advisors."
Placement Agents: Placement agents find investors (often institutional investors) for private placements and/or companies issuing securities. They are generally paid 2% to 5% of the deal (according to VC Experts), although I have seen more. The contract to hire a placement is called a "Placement Agent Agreement; you can see samples posted by Tech Agreements. Signing a Placement Agent may be considered "Entry Into a Material Definitive Agreement" that public companies report on a Form 8-K or other SEC filing. The SEC filing will often include the Placement Agent's fee or percentage.
