Tips on How to Avoid Stockbroker and Investment Fraud

Your investments are the heart of your monetary plan. Your investments allow you to retire with dignity, secure your future and build wealth for your family. So, why risk placing these important investments in the hands of someone you can’t trust?

Investment fraud, also called stockbroker fraud, happens when a stockbroker, adviser or a brokerage firm recommends unsuitable investments or strategies, or engaged in conduct that is contrary to the rules, regulations and best practices set forth by FINRA and the Securities and Exchange Commission. But following a few simple rules can decrease your chances of becoming a victim and help you avoid unwise investment advice.

8 Tips to Protect Yourself From Investment Fraud

1. Keep an eye on your investments. This doesn’t mean you have to be fanatical, but do check and read all notices you receive from your investment professional. Follow-up with your broker or adviser and stay actively informed. The more attached and engaged you are with your money, the less likely you will become a victim to fraud.
2. If there is little or no published information or no operating history of a company, don’t invest in it. There is a greater risk that it could be an unsafe or fraudulent investment.
3. You should hire an adviser who will take the time to explain your investments to you in simple terms and answer all your questions. Don’t trust someone who doesn’t have time for you.
4. Your broker should understand and respect your risk tolerance. If you cannot afford to take risky investments that bring a high probability of losing your capital investment, your broker should create an investment plan that reflects that. You may not get as much return for your investment, but you are also at much less risk of losing what your have. If you broker does not respect your stated risk tolerance, that is considered one type of broker fraud, and it is not acceptable.
5. You should never make a check payable directly to your adviser for any reason. If your broker asks for payment directly to go around the investment company, do not do it and report the incident to the company immediately.
6. Always make sure the broker and firm are listed with the Securities and Exchange Commission, FINRA, and licensed in your state. You can also confirm with your state securities regulator whether the broker or the investment firm have ever been restricted or have complaints against them.
7. You should never send money to buy an investment based merely on a phone sales pitch.
8. Don’t let anyone rush or pressure you into an investment. If your broker/adviser tries to pressure you or rush you into an investment, this could be a sign that they cannot be trusted. Get a second opinion about the investment and consider changing advisers.

If you will take a few safety measures before you invest, you can drastically reduce the probability of becoming an investment fraud victim. You work hard for your money, so don’t let a dishonest broker part you from it. Use these simple rules, trust your instincts, and be comfortable walking away from investments and brokers that make you uncomfortable.

If you believe you have been mislead or if your broker has recommended unsuitable investments or strategies, please contact us immediately.