When it comes to investing your money,
investing in stocks is one of the most common ways to earn money
passively. However, with any kind of investment, there is a risk
involved. If this is your first time investing, you might be more
concerned than other people. You might be scared of losing your
money to fraud.
We will be honest with you. There is a
chance of fraud in stocks, especially if you are a beginner. But
that shouldn’t stop you from exploring one of the most sure-fire
ways to earn some extra money. You can protect yourself from
stockbroker fraud by educating yourself of all dangers.
How to Protect
Yourself From Stockbroker Fraud
Here are 6 Ways to Protect Yourself
from Stockbroker Fraud:
When it comes to stockbrokers, it's
not a wise option to select a broker from a cold call you received
earlier in the week. This could be either a phone call, a letter or
even an email. You shouldn’t be trusting your money with a broker
who calls you out of the blue, especially brokers who are offering
you once-in-a-lifetime investment opportunity for a ‘limited time’.
A smart move is to ask your friends
and family for a recommendation. If you know a friend or a family
member who is doing particularly well with their investment, ask
them to arrange a meeting with their broker.
You can also look for your broker
online. We recommend finding secured and recommended online brokers
for beginners. Look for a broker who’s connected with a
Be Wary of Too Good
To Be True Offers
If your stock broker is promising you
the earth and the sky with a possible investment, you should be
asking more about the investment. Ask for past performance reports
and look at the figures. Do they really have a history of high
returns? Always look for written proof before committing to
anything. Also, often with higher returns, there is a higher
investment involved. Research on the investment before going forward
Research On Your
The first thing you should be doing
when a stock broker contacts you, is to research him. Search the
broker and his firm. A good place to do your research is on LinkedIn
since it’s a professional platform. Look closely at his professional
profile for any red flags. Check out his endorsements on LinkedIn.
When you research the firm, find out
if the firm is a member of SIPC. SIPC stands for Securities Investor
Protection Corporation. The SPIC is a non-profit organization that
protects investors in case of a financial bankruptcy for up to
The next step is to research their
company in regulatory agencies. It is mandatory for financial firms
and professionals to register themselves with federal and state
securities regulators. You can easily check on their registration
information, plus any disciplinary actions they might have been part
If you are considering going forward
with a broker, arrange a meeting with your broker. Ask him for
information. Ask lots and lots of question about the company, their
experience and also for references. It’s your right to ask
questions. Ask him about his rates, commissions and other payables.
If you feel that the broker is not forthcoming with information, you
might have to revise your decision.
Once you select your broker and made
your investment, don’t just expect the money to start rolling in.
Even if your broker is the most honest broker, you shouldn’t just
sit back and relax. Ask him questions at this phase too. What is he
investing in? What will be the expected returns?Review your
Letting your broker full control of
your investment is a big mistake. If you find out that your brokers
is buying and selling stock without prior consultation, talk to your
branch manager. Tell him that you did not authorize the transaction.
Buying and selling without notice violates state and federal law.
Most beginners often make the mistake
of letting their broker run the show. If you are uncomfortable with
how your broker is handling things, you can also ask him to connect
you with someone higher up in the agency. Don’t be embarrassed to
feel like a beginner. You are one and its okay to accept them.
Even if you have been a victim of a
fraud, you still have certain rights. The most important of those
rights is your right to fight back. You can file claim against your
stock broker or the firm. When you do so, an arbitrator will be
appointed to you by the NASD or the NYSE, depending on your stocks.
You can win back your investment, and sometimes maybe even your
interest and attorney fees along with punitive damages. The key is
to file your claim as early as possible.