Why the question comes first
Every expat community has its circuit: the advisor who speaks at the residency seminar, sponsors the club newsletter, and “specializes in Americans abroad.” Some of these people are registered US brokers or investment advisers, subject to FINRA and the SEC, and answerable in FINRA arbitration if something goes wrong. Some are licensed only in the host country. Some hold an insurance license somewhere and nothing else. Some are licensed nowhere at all. Which of these you dealt with decides whether a US claim exists, in what forum, and against whom — so it is the first thing we check in any offshore-advisor case, and it is the first thing you should check before you sign anything.
The checks below take about ten minutes and cost nothing.
BrokerCheck: for brokers and brokerage firms
FINRA’s BrokerCheck (brokercheck.finra.org) is the public record for anyone registered to sell securities through a US brokerage firm, and for the firms themselves. Search the individual’s full name. A registered broker’s report shows the firm he or she is registered with, prior firms, the licenses held, and — this is the part to read — the disclosure section listing customer complaints, arbitrations, regulatory actions, terminations, and criminal matters. A record with several customer disputes is a warning. A record that shows the person left the industry years ago, or was barred, is a stop sign.
If a name returns nothing, try variations — a middle name, a nickname, the firm name — before concluding the person is unregistered. If there is still nothing, the person is not currently registered with any FINRA member firm.
IAPD: for investment advisers
Investment advisers — the fee-based firms and individuals who manage accounts rather than sell products — are registered with the SEC or with a state, and their records are on the SEC’s Investment Adviser Public Disclosure site (adviserinfo.sec.gov). Search the firm and the individual. A registered adviser’s Form ADV describes what the firm does, what it charges, its conflicts of interest, and its disciplinary history, in a Part 2 “brochure” written in plain English. Read the fees section and the disciplinary section. An adviser registered in the United States is subject to a fiduciary standard, and a claim against one may go to FINRA arbitration if a brokerage was involved, or to another arbitration forum or court if not.
Many people hold both registrations, so check both sites. Investor.gov, run by the SEC, searches both at once.
Host-country and state regulators
If the advisor claims a license in the country where you live, the regulator there will have a public register: the securities commission, central bank, or financial services authority, depending on the country. Check it. A license to sell insurance is not a license to advise on securities, and a license in one country is not a license in yours. Within the United States, state securities regulators also register and discipline advisers and brokers; the North American Securities Administrators Association website links to each state’s regulator.
Ask the advisor directly, in writing: “Which regulator are you registered with, under what name, and what is your registration number?” A registered professional answers that question in one sentence. Evasion, a story about “international structures,” or a reference to a regulator you cannot find is itself the answer.
What “unregistered” means for your claim
If the person who sold you the product was registered with a FINRA member firm at the time — even if the product was not the firm’s and the firm says it knew nothing — there may be a claim against the firm. FINRA Rule 3280 requires a registered person to give the firm written notice before participating in any private securities transaction, and, where the person is paid, requires the firm to approve and supervise the transaction as if it were the firm’s own. Rule 3110 requires the firm to have a supervisory system that would catch a broker running an outside book. A firm that failed at either can be liable for the sale in FINRA arbitration. Our guide on selling away covers this in detail.
If no US-registered person or firm was involved at any point, there is no FINRA forum. The options are the host-country regulator, a civil claim in the host country or wherever the advisor and the money can be found, and reporting to the SEC, which does pursue unregistered sellers targeting Americans abroad. We will tell you honestly which it is.
- US-registered broker involved, even peripherally: FINRA arbitration against the firm is likely available
- US-registered investment adviser only: a fiduciary claim, forum depends on the advisory agreement
- Host-country license only: that country’s regulator and courts
- No license anywhere: regulator complaints, civil recovery where assets can be found, and honesty about the odds
The products that travel with unregistered advisors
Certain products appear again and again in these cases: insurance-wrapped “portfolio bonds” and offshore savings plans with 10- to 25-year terms and heavy exit penalties; funds not registered for sale in the United States; “structured” products issued by entities you cannot look up; and private notes promising fixed returns. Several of these are also passive foreign investment companies for US tax purposes, which is a separate and expensive problem. One caution that applies to every paragraph here: we are securities litigators, not tax advisors. Anything involving your US return, the foreign earned income exclusion, or how a sale is taxed belongs with a CPA who handles expats.
Key takeaways
If you remember six things
- Who regulates the advisor decides whether a US claim exists. Check before you sign, and check again before you file.
- BrokerCheck for brokers and brokerage firms; the SEC’s IAPD for investment advisers; Investor.gov searches both.
- Read the disclosure section, not just the registration status.
- Ask for the regulator, the registered name, and the number, in writing. A professional answers in one sentence.
- A US-registered broker involved even peripherally can make the firm liable under FINRA Rules 3280 and 3110.
- No US registration anywhere means no FINRA forum — and we will say so rather than take the case.
Questions
Asked most often
The advisor’s firm has a US-sounding name and a US phone number. Is that enough?
No. Names and phone numbers prove nothing. Search the firm and the individual on BrokerCheck and IAPD, and if neither returns a current registration, the firm is not a US-regulated broker or adviser regardless of its letterhead.
My advisor is licensed in the country where I live but not in the US. Can you help?
Usually not in FINRA arbitration, unless a US-registered person was also involved. We will check for that at no charge, and if the answer is no, we will point you to the host-country regulator rather than take a case we cannot pursue.
What is an offshore “portfolio bond” or “savings plan,” and why does it keep coming up?
They are insurance wrappers around a portfolio of funds, sold heavily to expats by commission-based advisors, with long terms and steep early-exit penalties. Their fees and exit charges are the usual complaint. Whether a US claim exists depends entirely on who sold it.