Is your financial advisor a criminal? Stats say ...

It sounds totally outrageous, but have you ever wondered whether your investment advisor killed a man?

It's not beyond the realm of possibility, and in at least one case, it actually happened. But before you get too alarmed, chances are overwhelmingly high that your financial advisor does not have a criminal past — and if he or she does, statistically it was almost certainly many decades ago.

Investment advisor representatives (the people themselves, not the firms) registered with state agencies are required to disclose their involvement in a wide array of regulatory, disciplinary or criminal actions, and those disclosures are recorded in a massive SEC database covering hundreds of thousands of advisors at firms like Merrill Lynch, Wells Fargo and Morgan Stanley.

About 20 percent of registered investment advisor representatives have some sort of disclosure document on file, and about 2 percent have reported criminal charges like a felony conviction or investment-related misdemeanor, according to a Big Crunch analysis of the data. (CNBC contacted a number of industry groups to weigh in on the data; their responses are expected in coming days).

Among the required disclosures for advisor representatives registering with state authorities are customer complaints of $15,000 or more, being fired from previous jobs for investment-related reasons, bankruptcy declarations and being charged with any felony or any misdemeanor involving fraud, false statements, wrongful taking of property, bribery, perjury, forgery, counterfeiting or extortion.

The Big Crunch pulled more than 4,000 detailed criminal disclosures and found that about half were for felony charges. Here's some of what we found (aside from the one person who plead guilty to second-degree murder and served 6 years before being pardoned):

  • Controlled substances were mentioned in 11 percent of records, especially marijuana and cocaine.
  • Operating a vehicle under the influence of alcohol accounted for 3 percent of offenses.
  • Some 7 percent of criminal disclosures involved assault.
  • About 8 percent of representatives with criminal disclosures were charged with fraud.
  • Seven people were charged with kidnapping.
  • Nine people were charged with rape.
  • At least two people were accused of murder or intent to murder.
  • More than a dozen people were charged with terroristic threats or acts.
  • One person pleaded guilty to blackmail.
  • Two were charged with public indecency.
  • More than a fourth of all charges involved shoplifting, theft or larceny.

In describing their run-ins with the law, many advisors blamed the mistakes of youth. Many people said they were drunk at the time, 3 percent of all disclosures were the result of "a prank," and 2 percent mentioned a college fraternity.

"I was visiting a friend who may have been involved in bookmaking," wrote one advisor who was charged with promoting gambling, a felony charge that was later reduced to a misdemeanor. "When police arrived I was arrested because I was in the wrong place at the wrong time."

Nine other advisors also described their legal troubles with the same phrase — "the wrong place at the wrong time."

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According to the analysis, half of all charges were leveled before 1994. Considering that the average financial advisor in the U.S. is over 50 years old, many of these advisors were in their 20s or younger when these events took place.

To be fair, financial advisors are also a rather law-abiding group. Even if every financial advisor charged with a felony was convicted, that would still only be 1 percent of the group. Compare that to the average adult American — almost 9 percent of them have a felony conviction.

Ed Gjertsen, the national president of the Financial Planning Association and a registered investment advisor representative, said that the organization supports a full and fair disclosure of information to help investors make informed choices.

"You're putting your nest egg in somebody's hands," he said. "We don't all need to be running for sainthood, but you want someone with a clean record."

Some offenses are black and white and would likely prevent someone from even getting an advisor representative job in the first place — like stealing from prior clients. But even smaller crimes or youthful indiscretions may be important pieces of information for a discerning consumer, Gjertsen said.

"It doesn't mean you automatically cut them off, it just means you have to have an additional conversation in regard to that specific event," he said. "There are plenty of people who I'm sure have some sort of checkered past, but nothing egregious, and you don't want to just discount them flat out — it's just additional information."

By the way, Gjertsen and the Chicago-area firm he represents, Mack Investment Securities, both have a spotless record as investment advisors and broker-dealers.

Advisory firms are a different story

While individual advisor representatives have to report their mistakes forever through the Form U4, the advisory firms that employ them are held to a less stringent standard. Under the SEC's Form ADV, they must only report conviction or "no contest" felonies that occurred in the last 10 years and whether they've been charged with a pending felony or investment-related misdemeanor.

Less than 1 percent of about 12,000 such firms report that a principal, advisory affiliate or controlling firm has been convicted of a felony.

You can explore the SEC data for investment advisor firms and representatives. There is also overlap with people who are registered as broker-dealers, who are regulated by FINRA — which has a more polished and better marketed database at Both groups have been pushing for consumers to make better use of the data available, but many investors are not even aware that the resources exist.

The Big Crunch is still digging and will have more on this topic in the upcoming days and weeks.