Opening a Brokerage Account: What to Check Before You Fund It

Before you move money into a new brokerage account, check the firm's registration and record, what SIPC does and doesn't cover, the account type, where idle cash goes and what fees apply.

Published by Greg M., Editor in Chief · Updated November 9, 2026

Opening a brokerage account takes a few minutes online. Checking what you’re signing up for takes a little longer, and the easiest time to do it is before any money moves. Once your savings are inside an account, changing your mind can mean transfer fees, paperwork and sometimes a tax bill.

This guide covers what people commonly check before funding a new account: who the firm is and whether it’s registered, what protection applies if the firm fails, which account type you’re opening, what happens to uninvested cash, and what you’ll pay. It doesn’t name or rank any broker. The aim is to show what to look for, so you can compare any firm on the same terms.

Check the firm and the people in FINRA BrokerCheck

FINRA runs a free public tool for checking brokers and brokerage firms. BrokerCheck shows whether a person or firm is registered and gives a report on their background (FINRA, About BrokerCheck, checked November 9, 2026).

According to FINRA, a firm report includes:

• A firm profile: where and when the firm was established, and who owns and controls it.
• A firm history: mergers, acquisitions and name changes.
• Firm operations: the licenses, registrations and types of business it’s active in.
• Disclosures: arbitration awards, disciplinary events and financial matters.

A report on an individual broker lists the firms where they are or were registered, their employment history for the last 10 years, the registrations or licenses they hold, and disclosures such as customer disputes, disciplinary events and certain criminal and financial matters. FINRA notes that some disclosures may be pending actions or allegations that haven’t been resolved or proven, so a disclosure is something to read, not a verdict.

FINRA’s page on checking registration (checked November 9, 2026) adds two more places to look. BrokerCheck links through to the SEC’s Investment Adviser Public Disclosure database for advisers who aren’t FINRA-registered, and FINRA suggests contacting your state securities regulator as well.

When you look a firm up, it helps to check that the name on the account application matches the registered firm exactly. Similar names are common, and the legal entity holding your account is the one whose record matters.

Read the firm’s relationship summary (Form CRS)

The SEC’s investor bulletin on opening a brokerage account says to read the firm’s relationship summary, known as Form CRS, before opening an account, and to check the broker’s background and disciplinary history (Investor.gov, “How to Open a Brokerage Account”, dated June 10, 2021, checked November 9, 2026).

The bulletin points to Form CRS as the place to find the fees that apply at that specific firm. It also notes that brokerage accounts, where you generally make your own decisions, differ from investment advisory accounts, which are generally governed by different rules, and it links to Investor.gov’s Form CRS page for more on the difference.

Know what SIPC protects, and what it doesn’t

The Securities Investor Protection Corporation (SIPC) steps in when a member brokerage firm fails financially and customer assets are missing. SIPC describes its job as recovering missing assets in that situation (SIPC, “What SIPC Protects”, checked November 9, 2026).

The key facts from SIPC’s page:

• The limit is $500,000, which includes a $250,000 limit for cash.
• What’s covered includes stocks, bonds, Treasury securities, certificates of deposit, mutual funds and money market mutual funds, plus cash held in the account for buying or selling securities.
• What isn’t covered includes commodity futures contracts (except in a special portfolio margining account), foreign exchange trades, investment contracts such as limited partnerships and fixed annuity contracts that aren’t registered with the SEC, and digital assets that aren’t securities.
• Market losses aren’t covered. SIPC says plainly that it does not protect against a decline in the value of your securities, or against losses from bad advice or unsuitable recommendations.
• It isn’t FDIC insurance. SIPC states that its protection is not the same as FDIC protection for bank deposits.

SIPC’s site links to a list of its member firms, which is one way to confirm independently that a firm is a member.

Confirm the account type: cash or margin

Brokerage firms generally offer at least two account types, according to the SEC bulletin. In a cash account you pay the full price of what you buy and can’t borrow from the firm. In a margin account you can borrow from the firm to buy securities, using the securities in the account as collateral and paying interest on the loan. The bulletin notes that margin can increase purchasing power but also exposes you to the potential for larger losses.

The bulletin flags one detail in capital letters: some account applications make margin the default. It says to confirm you’re opening the account type you want before you sign. This is one of the easiest things to check and one of the easiest to miss.

The account type is separate from the tax wrapper. A brokerage firm may offer taxable accounts, IRAs and Roth IRAs, and the tax rules differ for each. For how those wrappers work, see IRA, Roth IRA, taxable or HSA.

Decide what happens to uninvested cash

Money waiting to be invested has to sit somewhere. The SEC bulletin describes three common arrangements:

• A bank sweep program, which moves uninvested cash into deposit accounts at one or more banks, which may or may not be affiliated with the broker.
• A money market fund sweep, which moves cash into one or more money market mutual funds.
• Leaving the cash in the brokerage account itself.

Not every firm offers all three, and some place cash in a particular option by default. The bulletin points out that the options can differ in interest rate and in the protection that applies (FDIC for bank deposits, SIPC for cash and securities at the broker), and that a firm may have a financial incentive to use one sweep program over another. For bank sweeps, it explains that FDIC insurance covers up to $250,000 per customer at each participating insured bank, and cash above that isn’t FDIC-insured.

What to check: which option your cash goes into by default, the rate it currently pays, and which form of protection applies. If you’re comparing where to keep short-term cash more generally, MoneyMaster’s guide to high-yield savings, CDs and Treasury bills covers the options outside a brokerage account.

List the fees before you fund

The SEC bulletin lists the fees a brokerage account can involve and says they vary among firms. Grouped the way the bulletin groups them:

• Transaction costs: commissions on trades; markups and markdowns when a firm sells to you from, or buys from you into, its own inventory; and loads on some mutual funds and variable annuities.
• Account fees: maintenance fees (sometimes charged only below a balance threshold), inactivity fees, account closing fees, margin interest, and wire or transfer fees.
• Investment-level costs: separate from the account, funds and ETFs carry their own ongoing expenses.

A firm’s Form CRS and fee schedule are where the actual amounts appear. Investment-level costs are covered in what a fund’s expense ratio costs and loads, 12b-1 and advisory fees. To see how a difference in ongoing fees compounds, the fee-drag calculator compares two fee levels over time using assumptions you enter.

Transferring an existing account

If you’re moving an account rather than opening a fresh one, the bulletin notes two extra points. You may pay fees to transfer, and the new firm may not accept every security you hold. In that case the choices are to leave those holdings at the old firm or sell them and move cash, which can mean commissions and, depending on the account type, taxes, penalties or restrictions. Selling in a taxable account can create a capital gain or loss, so it’s worth knowing your cost basis first; see cost basis and Form 1099-B.

The other choices on the application

The bulletin lists the personal information a broker will typically ask for, including your Social Security or taxpayer identification number, date of birth, government ID details, employment, income, net worth, investment objectives, risk tolerance, time horizon and liquidity needs. Brokers need much of this to comply with laws and regulations.

It also lists a few choices that are easy to skip past:

• Investment objective and risk tolerance. Firms use different labels, such as “capital preservation,” “growth” or “speculation.” The bulletin suggests making sure you understand what each label means and how much risk it implies.
• Statements and confirmations, on paper or electronically. The bulletin says to check them for accuracy and to contact the firm promptly, by phone and in writing, about anything you didn’t authorize.
• A trusted contact person, which appears on the bulletin’s list of information a broker may ask for.
• Discretionary authority. In a brokerage account you generally make your own decisions. Giving a broker or anyone else authority to trade for you requires written authorization, and the bulletin advises thinking carefully about the risks first.

Before funding any investment account, it’s also common to have a separate cash reserve for emergencies, so that a surprise bill doesn’t force a sale at a bad time. MoneyMaster’s emergency fund guide covers that step. For what you might hold once the account is open, start with stocks, bonds and cash and index funds and ETFs explained.

Common questions

Does SIPC protect me if my investments fall in value? No. SIPC says it does not protect against a decline in the value of your securities. It protects against missing cash and securities when a member firm fails, up to $500,000 including $250,000 for cash.

Is a brokerage account the same as an IRA? Not quite. “Brokerage account” describes where the investments are held. An IRA or Roth IRA is a tax-advantaged account type that a brokerage firm can hold for you. Many firms offer both.

What if a broker has disclosures on BrokerCheck? FINRA notes that some disclosures are pending or unproven allegations. Reading the detail, and the broker’s own comment if there is one, gives the context.

Can I open a cash account instead of margin? The SEC bulletin says firms generally offer both, and that some applications default to margin. The bulletin suggests confirming the account type on the application before signing.

Where do I find a firm’s actual fees? In its Form CRS relationship summary and its fee schedule. The SEC bulletin points to Form CRS for firm-specific fees.

Sources checked November 9, 2026: FINRA, About BrokerCheck; FINRA, Check Registration; SIPC, What SIPC Protects; SEC Investor.gov, Investor Bulletin: How to Open a Brokerage Account (dated June 10, 2021).