How Can a CPA Protect Their Clients from Investment Fraud?

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Since 1999 our law firm has recovered more than $350,000,000 for victims of investment fraud and misconduct.
  • Jury Verdict Won Against Prudential Securities $262 Million
  • Recovered for 100-Year Old Widow $30 Million
  • Recovered in Retirement Losses $10 Million
  • Recovered for a Large Group of Individual Investors $6.5 Million
  • Recovered for Elderly Victim in Ponzi Scheme Case $3.8 Million
  • Recovered for Elderly Ponzi Scheme Victim $3.2 Million
  • Recovered for More Than 50 Families of Ponzi Scheme in California $3.2 Million
  • Recovered for 35 Families in Northeast Ohio $3.1 Million
  • Losses Recovered for 20 Retirees $3 Million
  • Recovered for Retired Physician Against Major Wall Street Firm Prior to Filing FINRA Arbitration $2.5 Million
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How Can a CPA Protect Their Clients From Investment Fraud?

How can a certified public accountant or tax preparer help protect their clients from becoming victims of investment fraud? Over the past 15 years, many investment fraud cases have been referred to our law firm by CPAs and other tax professionals. The fact is, CPAs can serve as a strong frontline defense in helping to detect and prevent instances of investment fraud. If you’re a CPA or tax professional, I want to talk about several red flags that you can look out for to help protect your clients from unscrupulous stock brokers and investment scammers. Excessive trading a churning is a tactic that some brokers use to generate excessive commissions.

A good rule of thumb is that if your client’s Schedule D on the Form 1040 for capital gains and losses is more than one page long, then there’s a good chance that you should look into the transactions more closely. Large losses are also a red flag that may indicate inappropriate investments, especially in the accounts of clients who have limited assets, who are recent widows, or who recently inherited funds. You should be alert to a client who expresses surprise at their losses. If your client’s 1099 from the brokerage firm reflects significant losses, then you should consider looking closely at the brokerage account statements to determine what else the client might be invested in.

Another red flag is money being returned to the client as return of principal instead of income. Sometimes, brokerage customers mistakenly believe that their principal is safe and intact, when in fact, it is being depleted through distributions that the client believes are from income. The client’s brokerage statements may not reflect the source of the distributions, however, you can reconcile distributions the client receives from reports such as the K-1s of partnerships and 1099s.

Finally, because of their unique knowledge of their clients and financial situation, CPAs may be able to detect the financial exploitation of elderly or vulnerable clients such as the recently widowed. Be on the lookout for erratic or unusual banking transactions such as frequent, large withdrawals, uncharacteristic attempts to wire large sums of money, or the closing of CDs or accounts without regard to penalties.

By keeping an eye out for these red flags, tax professionals can play a vital role in protecting their clients from investment fraud.

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Meyer Wilson has represented over 1,000 individual investors in high-stakes claims across the country, and has recovered over $350 million on their behalves. See what former clients have to say about our team.

  • “I primarily worked with Courtney Werning throughout the process and she was informative and knowledgeable. I trusted and fully recommend Courtney and her team.”

    - S.R.
  • “The communication throughout the process was on par - and they took the time to indulge me with the various questions and opinions.”

    - R.G.
  • “What I truly appreciated was getting a great result for my Mom with limited involvement/stress on her.”

    - S.W.
  • “We went to arbitration with the other respondent and I got to see firsthand the level of professionalism and expertise the Meyer Wilson firm can deliver.”

    - D.V.
  • “Chad would take the time to call and talk with me. His explanations were always clear and concise. I also appreciate all the effort put into the details and statistics required to argue this case.”

    - P.N.
  • “Meyer Wilson was able to produce the results that we felt were obvious and warranted while several other firms and even state offices simply had trouble understanding let alone moving the case forward.”

    - B.K.
  • “My overall experience was positive and I would encourage anyone who even thinks they have been a victim of stockbroker misconduct to call David.”

    - S.T.
  • “Meyer Wilson represented me in a suit brought last year against my brokerage firm, securing a very fair and equitable settlement for me.”

    - R.G., M.D.
  • “Right from the start, you had the passion and desire to win this case for us. I have never worked with an attorney or firm as compassionate as yours. I would highly recommend your firm to anyone.”

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