Avoiding Securities and Investment Fraud
Securities and investment fraud can come in many forms. Knowing how to recognize the warning signs and underhanded tactics brokers, traders, and other investment entities use to trick unsuspecting investors out of their money can help you stay protected. Avoid the pitfalls of losing your retirement and other investments by heeding these tips to keep investment fraudsters at bay.
Do Your Research Before Investing
Before you invest with anyone, it’s critical to understand the products and services they offer. Dig beyond their emails, brochures, and news releases for additional information. You can view financial statements and other regulatory filings for investments by searching the U.S. Securities and Exchange Commission’s (SEC) Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system. The database is free to the public.
Ask Your Broker The Right Questions
It can be easy for brokers to get away with investment fraud if you don’t take time to ask questions before you begin investing. Doing your homework can save you from losing your investments to fraudulent activities. Investor.gov has a list of questions that you should ask before and after you invest your money.
Know Your Broker
One way to ensure your investments will stay protected is by knowing who you are working with. Ensure the person you are dealing with is licensed to sell securities or give investment advice in your state. Learn whether they have ever been the subject of disciplinary action or customer complaints. Look up their records on the free and publically-available FINRA BrokerCheck website.
Know the Warning Signs
Investment fraudsters rely on persuasion tactics to get people to invest their money with promises of a lucrative return. However, knowing these warning signs can keep you from becoming a victim of securities and investment fraud.
- Too-good-to-be-true promises - If you are presented with an investment opportunity that claims you’ll receive a substantial return, not only can this indicate a high-risk investment, but it’s also a warning sign of possible fraud.
- Your returns are guaranteed - If your broker is trying to convince you that high-risk investments will render you guaranteed high returns, walk away. Every investment comes with risks and without guarantees.
- The “everyone is buying it” sales pitch - Investment advisers may use this tactic to get you to purchase a product that is of no interest to you. Brokers should always have your best interest in mind, and this could be a telltale sign of fraudulent behavior, so beware.
- The pressure to send money immediately - Victims of a scam may be persuaded to invest for fear that it’s a once-in-a-lifetime opportunity and that if they don’t invest in it today, they are going to miss a chance to make money. Don’t fall for this common tactic, and do your research on the investment first before shelling out any money.
Excessive Trading Practices
When a broker aggressively buys and sells securities in a client’s account with full disregard to the client’s investment goals, so that they can generate commissions for their benefit, this is known as “churning.” Warning signs of churning may include:
- Your broker makes trades that you did not authorize.
- Your broker is making frequent trades that are not consistent with your investment goals and risk level.
- Your fees seem higher than usual, or one portion of your portfolio is steadily generating high fees.
How To Handle Investment Fraud
Investment fraud claims are complicated and can be riddled with red tape. So, it’s critical to find an attorney who knows how investment fraud claims work within legal parameters. Having a lawyer on your side who is experienced with these types of claims can make all the difference in the outcome of your case.
Were You a Victim of Securities Fraud? Contact Meyer Wilson
If you’ve suffered losses due to the negligence of your broker or investment adviser’s negligence, you may be eligible to recover damages through Financial Industry Regulatory Agency (FINRA) arbitration. Our experienced investment misconduct lawyers are here to hold financial institutions accountable for fraudulent activities that cost our clients’ money and assets.
Call Meyer Wilson at (800) 738-1960 or contact us online to speak confidentially with an attorney today.