InvestorSecurities Division, MarylandEducation Attorney General’s Office How to Choose a Stock Broker 1. Determine how much and what type of service • Ask for and check references from several you want from your brokerage fi rm and stockbroker. clients. Ask these clients how much better off they are as a result of the services of the • A full-service fi rm will off er investment stockbroker. advice, make recommendations, and off er research support. A discount broker typi- • Don’t make a decision about a brokerage fi rm cally charges less than a full service fi rm, or stockbroker based solely on a telephone but doesn’t make recommendations about solicitation, advertisement, or seminar. buying or selling a specifi c security. 3. Ask about fees and commissions. 2. Research your brokerage fi rm and stockbroker. • Most brokers earn commissions when they • Stockbrokers must be registered with each buy and sell investments on behalf of their state in which they regularly conduct busi- clients. Make sure you understand these costs ness, and licensed through the Financial before opening an account. Industry Regulatory Authority (FINRA). • Many brokerage fi rms charge ongoing fees • Call the Maryland Securities Division, related to the maintenance of your account. 410-576-6494, to verify the fi rm’s and the Make sure you understand these fees and how stockbroker’s registration and to check for a they are charged to your account. complete disciplinary history. You may also check BrokerCheck on the web at www. 4. Determine your investment needs and objectives fi nra.org/InvestorInformation/Investor- such as short term profi ts, long term growth, steady Protection for some information, but not income, and tax savings. necessarily all adverse information, on fi rms and their stockbrokers.stockbrokers. • MakeMake yyourour goals clear to yyourour brbroker,oker, prprefer-efer- ably in writing.

• YourYour iinvestmentnvestment ggoalsoals sshouldhould bbee aaccuratelyccurately rre-e- fl ectedected onon youryour newnew accountaccount form.form. CheckCheck thethe formform aandnd ggetet a ccopyopy fforor yyourour rrecords.ecords.

• IfIf youryour invinvestmentestment goals change, be sure that your broker’s records and your records accurately refl ect your revised objectives.

200 St. Paul Place • Baltimore, MD 21202 • 410-576-6360 www.oag.state.md.us/Securities 5. Determine your tolerance for risk. 7. Make sure you can understand account state- ments and confi rmation slips. • Your new account form requires that you specify the level of risk you are willing to • Understanding your account statements take to achieve your fi nancial objectives. If and confi rmation slips is key to controlling you don’t understand some of the catego- your investments. Check the statements ries in the form, ask your broker to explain over carefully as soon as you receive them. what each category means. Make sure you Familiarize yourself with the format, terms, fully understand how much risk is involved and codes used by your brokerage fi rm. in each category. Call for a copy of our booklet Understand- ing Your Brokerage Account Statements, it will • Remember a basic investment rule: the help you decipher your account statement. higher the potential rate of return, the greater the risk. If you are promised spec- • If you ever fi nd information in your account tacular, or even above-market returns, be statement or confi rmation slip that you do skeptical and ask questions. not understand, contact your broker imme- diately and get a satisfactory explanation. 6. Make sure you understand the type of account you want to open before youyou sign any customer Remember to do your own homework, and call us agreement. to inquire about your broker’s status.

• If you open a discretionary account, youyou Call us. We’re here to help. allow your broker to make investment deci- sions without consulting you about each Th e Maryland Securities Division transaction. Your broker will not obtain 410-576-6360 your authorization about the price or type of security or when to buy or sell securi- Visit our website at: ties, but will buy and sell securities based http://www.oag.state.md.us/securities on his/her determination of what will best meet your investment objectives.

• If you open a margin account, you may Free Publications Available borrow money from the brokerage fi rm to buy securities. You are required to pay If you would like to receive a full listing of all our interest on that loan and the securities in investor education publications, visit our website at your account are collateral for that loan. If www.oag.state.md.us, call us, or you buy securities on margin, you are liable send your request to: for the outstanding balance of the loan regardless of the value of the securities pur- Investor Education chased. If the securities in your account fall Maryland Securities Division in value, you may receive a margin call that 200 St. Paul Place requires you to add funds to your account, Baltimore, MD 21202 or risk the sale of your securities.

2/09 www.oag.state.md.us/Securities