The first rule in investing with a broker is not to use any broker than randomly calls you on the phone unless you are willing to meet them in person and do a very exhaustive review of their company. The second, and most important rule, is that the account statements you receive must be from an independent custodian, the bank or institution that actually holds the securities you own. If you are receiving only statements from your broker you in fact have no way of knowing if they are correct. This is why Bernie Madoff was able to steal hundreds of millions of dollars since there never was any independent confirmation of what was in each account.
Your contract with the broker should require that each transaction that you enter be confirmed by you personally and that the broker is not allowed to trade without your consent.
While using a major brokerage firm (ML, Charles Schwab, etc) gives significant protection over an individual broker or a small independent firm, it does not perfectly guarantee completely safety and most smaller brokerage firms are very reputable.
Your final recourse, should something go wrong in your account is to file a complaint with Finra.org and the SEC.gov. As long as your contract with the broker stipulates how he is to manage your account you are very well protected.
John A. Denney, CFA