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Is Firstrade Safe and Legitimate Firm? Is Firstrade Securities a Scam/Fraud? Is it FDIC/SIPC Insured? Firstrade BBB Rating.



Is Firstrade a Scam?


If you’ve been enticed by Firstrade’s $0 stock, ETF, and option commission, but aren’t sure about the broker’s track record, we have some answers for you. Be aware of the following facts before opening an account:


Is Firstrade Registered With FINRA?


The Financial Industry Regulatory Authority, more commonly known as FINRA, is responsible for overseeing the conduct of broker-dealers in the United States. The organization is mandated by Congress and funded by member dues. In addition to regulating member brokerage firms, FINRA is also tasked with overseeing the New York Stock Exchange.

Firstrade’s FINRA member number is 16843. The broker is registered in all 50 states plus the District of Columbia, the Virgin Islands, and Puerto Rico. In addition to the firm, top executives are also registered with FINRA.

The company’s CEO is John Liu. He has passed six securities exams and has been at the helm of the company since 1985, the year the company was founded. His FINRA ID number is 712988.

Since 1985, Firstrade has had a few regulatory transgressions. For example, in 1999 Firstrade was fined $3,500 for failing to develop a written continuing education training plan.

Firstrade is also a member of the U.S. Securities and Exchange Commission. The SEC is tasked with regulating the investment markets in America along with FINRA. Firstrade’s SEC ID is 8-34642.


Is Firstrade FDIC Insured?


The Federal Deposit Insurance Corporation only protects banks. Firstrade isn’t a bank; it’s a brokerage firm. As such, it does not qualify for FDIC protection. No broker does, unless it also offers banking services. Firstrade does offer a debit card, but free cash balances remain in a brokerage account; so the FDIC doesn’t cover any balances at Firstrade.


Is Firstrade SIPC Insured?


We did find that Firstrade is part of SIPC. So yes, brokerage accounts are protected up to a maximum of $500,000. This limit includes $250,000 of cash protection. So if you had $300,000 of cash sitting in your account, and Firstrade went bankrupt, $50,000 would not be insured. Or if you had $700,000 worth of stocks in your account, and Firstrade couldn’t pay its bills, $200,000 would be uninsured. Most investors have less than $500,000 at one broker; so these situations are rare.

Also keep in mind that the $500,000 guarantee is per brokerage house. If you did have more than that amount, you could split it between multiple brokerage firms, which would increase the total amount of SIPC protection you could have.

Remember that SIPC only insures the number of shares in your account up to a dollar amount and not the share price. For instance, let’s say you had 200 shares of Costco in your account. If the company filed for bankruptcy, those 200 shares would be guaranteed, but the share price would not. If the stock price went to zero, there is nothing SIPC would do for you.

Additional Insurance:

Firstrade accounts have additional protection in case SIPC insurance were ever exhausted. Known as “excess SIPC,” this additional insurance policy covers each account up to $37,500,000 worth of securities and $900,000 in cash. The caveat here is that there is a brokerage firm limit of $150,000,000. As with the standard SIPC policy, this supplemental insurance does not protect against market losses.


What Clearing Firm Does Firstrade Use?


Firstrade’s clearing firm is Apex Clearing Corporation. A clearing corporation is responsible for ensuring that trades settle correctly, and that transaction details between buyers and sellers are recorded properly.

Apex’s FINRA ID is 13071, and its SEC number is 8-23522. In addition to these memberships, Apex is also a member of the New York Stock Exchange, Nasdaq, the Miami International Securities Exchange, and several other organizations.

The clearing firm has been in business since 1979. Because Apex works with many brokerage firms and has such a long history, it has been fined several times by FINRA. For example, in 2001 it paid a $100,000 fine for failing to report short sale transactions, among other failures.

Having some FINRA sanctions in its history does not necessarily mean a securities firm is a scam. Most legitimate securities firms do have some FINRA disclosures on their profiles.


Is Firstrade safe?


Firstrade BBB Rating


The Better Business Bureau grades companies based on criteria such as number of complaints filled with BBB, whether the complaints were resolved, the time the company has been in business, and government actions taken against the firm. BBB rates Firstrade an A+, its highest rating. You could find the details on Better Business Bureau website at this link.


Is Firstrade Safe Judgment


Firstrade is definitely not a scam. It is a legitimate company with a long history. Its clearing agent is one of the most widely-used firms in the industry. Firstrade is also tightly regulated by securities watchdogs. Remember, though, that the market is totally unpredictable, and no one guarantees against loss in investment value.


Firstrade Review


Firstrade rating

Firstrade Securities review article provides information on how to open an account at the firm; their pricing for trading stocks, options, mutual funds and ETFs; benefits and drawbacks of their accounts as well as trading tools overview.