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How To Protect Yourself from Stockbroker Fraud



10 Keys



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:

Look for Recommendations

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 registered company.



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 with it.

Research On Your Broker

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 $500,000.

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 of.



Ask Questions

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.

Review Accounts Regularly

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 accounts.

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.

Don’t Make Assumptions

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.