CRD Central Registration Depository
What is the Central Registration Depository (“CRD”)?
The CRD Central Registration Depository is the master database for all licensing and other registration records and information for FINRA members and associated persons. The Financial Industry Regulatory Authority (also known as FINRA) controls the CRD Central Registration Depository. This includes information for registered stock brokers, broker-dealers, and other securities firms. The Financial Industry Regulatory Authority uses Central Registration Depository data that members of the securities industry submit to manage more than 3,300 brokerage firms, and more than 620,000 brokers (as of 2022).
The information maintained in the the database carries many purposes including populating the publicly available information that appears on FINRA’s BrokerCheck tool (see also our BrokerCheck “How-to” Guide that covers how to use BrokerCheck). Some of the information from the CRD Central Registration Depository also appears concurrently through the Securities and Exchange Commission Investment Adviser Public Disclosure (IAPD) website. That website also contains investment adviser representative information. Investment advisers and brokers must have the proper registration, and licensing. They must have also successfully passed the applicable qualification exams to legally sell securities. The CRD Central Registration Depository maintains this information and other information.
The information that populates the system is reported by firms and other securities industry members that they must report to comply with FINRA Rule 4530. That rule governs what firms and industry members must report to FINRA. Both broker-dealers and licensed individuals are assigned a CRD number.
Who and What Must be Registered with the CRD Central Registration Depository?
Brokerage firms must do the following: register information about its business practices; register information about current and potential brokers; obtain a CRD number; and pay registration related fees, with the Central Registration Depository. They accomplish this by filing several forms, the most common of which are described below:
Form BD is short for the Uniform Application for Broker Dealer Registration.
All broker dealers must file an initial Form BD, which the securities firm must then periodically amend and update.
Form BD requires firms to disclose to the Central Registration Depository CRD all direct owners and executive officers, and indirect owners. It also requires disclosure to the Central Registration Depository of any regulatory events.
The broker dealer must also register each branch office with the Central Registration Depository. To do so, the securities firm must file Form BR with the Central Registration Depository. Form BR is short for Uniform Branch Office Registration Form.
Brokerage firms must provide the following information on the Form BR:
- General information including address and contact information for the branch.
- Type of office and the types of securities activities that the specific branch engages in.
- Disclosure of other non-securities-related business activities that each branch performs, the websites it uses, and other names it may use.
- Branch office arrangements. For example, if the branch shares office space; if it jointly markets investment-related activities with other entities; and whether the branch maintains its books and records on location or elsewhere all constitute information for Form BR.
- Disclosure of each FINRA registered person who works out of the branch.
Financial Advisors licensed with the Financial Industry Regulatory Authority
A financial advisor must also register with the CRD Central Registration Depository. All financial advisors are assigned a broker CRD number. The broker CRD number is publicly available through BrokerCheck. The two primary form filings relating to a financial advisor that contain information that CRD Central Registration Depository uses to populate its data include Form U4 and Form U5.
Broker dealers use Form U4 to register brokers on the CRD Central Registration Depository. Broker dealers presently employ files Form U4 through the Central Registration Depository CRD system.
Form U4 collects detailed information, including background information ranging from: professional background, including the broker’s employment history, broker’s CRD number education, disciplinary history, and criminal history. The form also requires the individual to disclose any financial judgments or liens, customer complaints, bankruptcies, FINRA arbitrations, or other legal actions that may have an impact on their ability to work in the securities industry.
Individuals and firms must regularly amend Form U4 if any information included in it changes. Our page dedicated to the U4 Form provides a more detailed discussion about the nuances of the this form.
FINRA uses Form U5 to notify the securities regulators when a licensed financial professional voluntarily resigns, or when the brokerage firm terminates the broker. Form U5 is short for the Uniform Termination Notice for Securities Industry Registration.
Financial firms must submit the information from the Form U5, which in turn appears in the database. Our page dedicated to the Form U5 provides a more detailed discussion about the nuances of the this form.
Securities regulators also contribute information to the CRD through Form U6 filings. Regulators include FINRA, any state securities regulator, and the SEC.
The Form U6 contains identifying information including the broker CRD number (if the misconduct involved an individual broker), and the CRD number of the member firm involved in the misconduct. It contains details of any investigation and any conclusions or disciplinary actions taken.
In turn, broker dealers must also disclose the information provided on Form U6 to FINRA by filing amendments as needed to the Form BD, Form U4, and/or Form U5 that cite applicable disciplinary actions.
How does FINRA Ensure Information from Database is Accurate?
FINRA uses several tools to ensure accuracy of the information included in the CRD Central Registration Depository system. This includes fingerprint submissions and other dynamic measures to verify identity and crosscheck information provided to it.
Why does the Information on the CRD Matter?
The information on the registration system benefits the investing public, individual investors, individual brokers, and broker-dealer firms.
Benefits the CRD provides to the Investing Public
The investing public should have ample information about the backgrounds, licensure, location, information about customer disputes, disclosure histories, criminal history, and regulatory background of broker dealer firms and their employees. The decision to entrust funds—and in many instances an investor’s life savings—is one of the most important decisions an individual can make.
Accordingly, the investing public needs as much information as possible to make informed investing decisions. The system provides a mechanism for that. And investors can access most of this information publicly through FINRA’s BrokerCheck database, which draws information directly from the CRD Central Registration Depository. The database makes searching for this information simple due, in part, to the ability to enable Main Street investors to search by broker CRD number.
Benefits the CRD Provides to Brokerage Firms
Broker dealer firms benefit from the information on the CRD Central Registration Depository because they can use the information to vet the financial advisors they intend to hire. The information on the CRD Central Registration Depository may give rise to red flags relating to the employment history of a prospective investment adviser or broker. This information may suggest a propensity to engage in future misconduct.
This can help prevent financial catastrophes before they happen.
The system also creates a deterrent for firms to engage in securities misconduct. The threat of required, public disclosure through name or CRD number search of adverse regulatory events deters broker dealers from violating securities laws. Regular violations impact firms’ reputations, which negatively impact their financial interests.
Benefits the CRD Provides to Financial Professionals
The system also creates a deterrent for brokers from engaging in securities misconduct through their financial planning practices and/or how they provide personal finance advice.
If a broker knows that a customer complaint will become publicly available, he will be more inclined to ethically engage in the securities business to reduce the likelihood of such customer complaints. And in instances where a broker believes a publicly available customer complaint is meritless, FINRA provides a mechanism that allows brokers seek expungement of the investor complaint to remove it from FINRA’s BrokerCheck tool under FINRA rule 2080 (though the FINRA expungement rules will soon change).
Financial professionals also know that allegations of sales practice violations that result in their termination or resignation from a broker dealer also become publicly available on FINRA BrokerCheck. This too has a deterrent effect because any securities misconduct (from either a customer or an employing brokerage firm) results in searchable public disclosure available through a search of their name or CRD number.
This public disclosure can result in decreased clientele, or difficulty obtaining another job in the financial services industry.
*The Law Offices of Patrick R. Mahoney is a full service law firm with extensive experience litigating cases involving a host of securities-related issues. This page is for information purposes only and does not constitute legal or investment advice; nor is it a comprehensive explanation of all information on the CRD. If you believe you have a claim, or an inquiry, you should speak to competent counsel to better understand your options. Or, contact us.*[/section]