Warning Signs of Fraud During BrokerCheck
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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
BrokerCheck is one of FINRA’s tools that help inform investors and help keep them aware of potential issues in the financial advising community. Not everyone claiming to be a broker or financial advisor has the proper certifications and licenses to qualify them to trade investments on your behalf. Sometimes these people are con artists or completely unqualified. In other cases, they may nominally meet the standards, but have a history of complaints and lawsuits against them which they failed to disclose. To help prevent investors from being roped into working with fake brokers or broker-dealers with a history of bad practices, BrokerCheck supplies investors with information on every registered broker’s certification status, employment history, and disciplinary history. The FINRA arbitration lawyers at Epperson & Greenidge explain what signs of fraud or other issues to look for when using BrokerCheck.
What Does BrokerCheck Show?
First of all, BrokerCheck tells you whether the person you’re dealing with is registered with FINRA. Anyone who wants to trade stocks, bonds, mutual funds, or other investments needs to be registered with FINRA. That means that the first – and probably largest – red flag is if someone does not come up as registered. The financial industry professional you’re dealing with may go by a different name (such as their middle name), so make sure to try multiple spellings or names before jumping to conclusions. However, if you cannot find the person on FINRA’s BrokerCheck, odds are they are not a certified broker, and they may be trying to commit fraud or identity theft.
If you are able to find the individual or firm you are considering working with, their profile on BrokerCheck has plenty of important details that can help you understand their professionalism, reputation, and other aspects you should understand before working with them.
One thing BrokerCheck shows is the professional’s license status. FINRA administers various licenses and tests, such as the Series 7 exams, a.k.a. the General Securities Representative Exam (GSRE). Any stockbroker must pass this test to receive a license that allows them to make trades. There are other securities exams FINRA administers as well, and you can check any financial professional’s license status using BrokerCheck. If they do not have a license, they may be retired or may have had their license revoked, and they may not have the legal authorization to work for you. This could be a sign of fraud in and of itself.
You will also see the broker’s employment history, at least for the past 10 years. Think like a boss giving interviews when you review this information. A consistent track record with one firm is often a good sign, as is work in multiple different firms. But if the broker was frequently tossed from job to job, that may be a red flag that they did something at those jobs that forced them to leave.
Lastly, BrokerCheck shows a history of disciplinary measures. This includes complaints filed against them as well as claims, violations of FINRA rules, and other investigations. Any of these are automatic red flags you may want to investigate further.
Using BrokerCheck to Protect Yourself and Your Investments
BrokerCheck is a great tool to help prevent being taken in by fraudulent brokers or people running schemes and scams. However, not everyone knows about BrokerCheck at the start of their investing, and it may be too late for prevention. If you were already taken advantage of by a broker who made unauthorized trades, mishandled your investments, or breached the brokerage agreement, you should still check BrokerCheck.
BrokerCheck can help you verify whether your experience was as severe as you think it was. It is difficult if you are not a financial professional yourself to understand the limits of what is normal in the industry. Your broker may assure you that things they’ve done to your account are perfectly normal, and you may not have the knowledge or training to identify whether that’s true. Checking BrokerCheck can help you get a better picture of your financial advisor’s history, and help you judge whether you have been taken advantage of or whether your experience is typical.
If you become suspicious of your broker or financial advisor, check their BrokerCheck profile to see if others have had a similar experience. If any of the red flags above appear during your check, it may confirm your suspicions that your broker is acting suspiciously. If you think you may have been victimized, whether BrokerCheck agrees with you or not, you can always take your case to an attorney to help confirm the harm against you and discuss your next steps.
FINRA Claims Lawyers Offering Free Consultations for Investors
The FINRA claims attorneys at Epperson & Greenidge represent victims of fraud, financial negligence, and other harms committed by financial advisors. If you were taken advantage of or suspect that your broker-dealer mishandled your investments, talk to an attorney today. While BrokerCheck is a great tool to investigate your broker, opening a claim against them for FINRA arbitration helps your attorney investigate the situation and fight for damages on your behalf. For a free consultation on your case, call Epperson & Greenidge today at (877) 445-9261.