5 Signs of Investment Scams
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As reported in InvestmentNews, three Raymond James entities have agreed to pay over $15 million to resolve an investigation by the SEC. The settlement and SEC order focused on Raymond James’s actions in improperly charging certain clients advisory fees when the...read more
Brokerage firms and investment advisors are expected to help investors make sound financial decisions that align with the investor’s goals, risk tolerance, and background. Unfortunately, some brokers abuse their positions to further their own financial aims. Too often, the complexity of financial regulations makes it easy for unethical brokers to take advantage of the investors they are supposed to serve. If you’re an investor, it’s wise to learn about the common signs of investment scams. By recognizing the warning signs, you’ll be better able to protect yourself from fraud. If you’re concerned that you may be a victim of broker fraud, contact the FINRA arbitration attorneys of Epperson & Greenidge for legal assistance.
5 Warning Signs of Broker Fraud and Investment Scams
The laws that control the financial sector are extremely technical and comprehensive. Unfortunately, this can make it difficult for investors to recognize when they are being scammed by brokers or financial advisors – in some cases, until it is already too late. Even the most experienced of investors can fall prey to the increasingly sophisticated techniques being used by scammers, making it critical to learn what red flags to look for. Whether you’re brand-new to investing or a seasoned investor, be on high alert for these five warning signs of an investment scam.
#1: Your Broker Makes Guarantees
Reputable businesses don’t make guarantees they aren’t able to fulfill. If your broker “guarantees” big profits, zero risks, or high returns, don’t be deceived: it’s simply not possible for any financial professional to ensure the performance of a stock or company.
#2: Your Broker Can’t Explain the Strategy
While it’s true that financial laws are complex, your broker should still be able to explain a clear rationale behind his or her strategy. If your broker can’t give you a straightforward explanation of his or her actions, it may be wise to ask a Ponzi schemes lawyer if you’re in financial jeopardy.
#3: You Detect Unusual Activity in Your Accounts
You’re probably already in the habit of monitoring your bank and credit card statements carefully. Be sure to give the same attention to your investment accounts. If you notice unauthorizing trading activity, your broker may be buying or selling stocks or other securities without your permission, which is against financial laws. Another possibility is that your broker is engaging in an illegal practice called “trade churning,” which refers to making unjustifiable, excessive trades for the sake of earning higher commissions.
#4: Documentation is Missing
A registered security should be “registered” to a specific issuing agent or company, hence the term. If the seller of a security is unable to provide you with supporting documentation, such as an offering circular, it’s a red flag that the securities may not be registered with the U.S. Securities and Exchange Commission (SEC).
Why is this a problem for investors? Because, with some exceptions, selling an unregistered security is a felony offense. Examples of unregistered securities can include unregistered stocks, unregistered bonds, and unregistered hedge funds.
#5: Your Returns Are Too Consistent
Every investor likes to see high returns. However, it’s important to remember that market fluctuations are normal – and expected. If your investments are steadily giving you higher and higher returns without experiencing any dips or plateaus in performance, it may be an indicator that your broker is engaging in fraud.
FINRA Arbitration Lawyers Fighting for the Victims of Investment Fraud
Stockbrokers and investment advisors are bound to strict federal regulations. When a broker or brokerage firm violates regulations and causes an investor to suffer financial losses, the investor may be able to get compensated by filing a FINRA claim.
FINRA is the Financial Industry Regulatory Authority. Though not technically a government agency, FINRA is authorized by the SEC to sanction brokers who break investor protection laws. When an investor believes they have been defrauded by their broker, the investor can potentially file a claim with FINRA, which can settle the dispute through mediation or arbitration.
It is strongly advised that investors have legal representation during these complex proceedings. A knowledgeable FINRA attorney, like those at Epperson & Greenidge, can assist by drafting documents for the claim, working to protect your legal rights as an investor, and evaluating the FINRA arbitrators who are overseeing your case.
The FINRA claims lawyers of Epperson & Greenidge, LLP have extensive experience representing investors against brokerage firms and financial advisors in FINRA arbitration proceedings. If you lost money because your broker violated the law, our attorneys can work to recover the compensation you deserve. For a free consultation, contact Epperson & Greenidge online, or call (877) 445-9261 today.