Investor Protection

The U.S. government, as well as national and state regulatory agencies, provide numerous protections for investors. Check out the following list of government and nonprofit websites to keep abreast of current investment scams and to report and combat fraudulent activity.

• The Bureau of the Public Debt Alerts notifies investors to scams involving securities claimed to be backed by the U.S. government.
• The Commodity Futures Trading Commission alerts investors to possible fraudulent activity.
• FirstGov for Consumers provides consumers with information from the federal government. ScamAlert provides information on fraudulent and deceptive investment practices, law-enforcement contacts and tips for avoiding scams.
• The Investor Education section of the FINRA website offers investor news and Investor Alerts on various types of investment products.  FINRA also provides a service where investors can check the background of their broker or financial advisor, including any disciplinary action against him or her.
• The North American Securities Administrators Association is an international organization devoted to investor protection. It is comprised of securities administrators from the U.S., Canada and Mexico. Its website carries a list of securities regulators by state and territory as well as an interactive Investment Fraud Awareness Quiz. The Investor Education section offers Investor Tips, including top investment scams and information for older Americans on avoiding investment fraud and abuse.
• The North East Fraud Forum, an organization based in the United Kingdom, offers links to several fraud advisory sites.
• The Investor Information section of the Securities and Exchange Commission’s web site provides Investor Alerts with information on how to spot scams and fraud.
• The Securities Investor Protection Corporation offers several investment fraud education resources.

A sound financial plan requires careful investing. You need to know that the vehicles you are investing in, and the professionals you are using, are legitimate. Protect your finances by identifying and avoiding fraudulent investment schemes. Following are some ways to know if you are being offered an investment that is genuinely too good to be true.

• Do not be pressured, or feel panicked, to invest. If someone you do not know contacts you by phone, fax, or e-mail, with recommendations based on “inside,” “confidential information” or unidentified “ratings and research reports,” beware. Likewise with offers claiming extraordinary profit “guarantees.”
• Never make an investment with anyone you do not know without receiving proof of his/her credentials and of the investment they are proposing. Ask for proof that he/she is registered with the U.S. Securities and Exchange Commission (SEC) and your state’s security agency (available through the North American Securities Administrators Association). Your state’s security agency can check the Central Registration Depository (CRD) to see if the broker you have been contacted by, or his/her firm, has a record of disciplinary action or complaints. Your state agency can also let you know if the investment you are being offered is approved for sale in your state.
• Click here to learn more about “How to Choose a Financial Professional.”
• Ask for a copy of the prospectus—or official statement, in the case of municipal bonds—for the investment they recommend and current financial statements from the company. You can check to see if a company is registered with the SEC through the SEC’s EDGAR database free of charge. To check on smaller companies who are not required to register with the SEC, contact the SEC at (202) 942-8090 to find out if the firm has filed an offering circular, and to request a copy.
• Make out checks (or wire funds) only to a brokerage firm, never to an individual broker or sales representative. Only send, or wire, money to the business address for the firm as listed on an official print business document.
• Don’t allow your transaction confirmations or account statements to be sent to anyone other than yourself, particularly to a sales representative whom you have only talked to by phone.

If you think you may be the victim of fraudulent activity:

• Call and ask to speak with the sales manager or compliance officer of the firm to register a complaint. Send a written letter to the firm and keep a copy for your files. Ask the manager or officer to send a written response to your concerns. Keep a file of correspondence (print, e-mail and fax) and a written record of all phone conversations.
• Call your state securities agency or FINRA to register a complaint or inquire about suspected fraud activity.
• While most complaints against brokers are handled through FINRA arbitration, if you are considering legal action against a sales representative/broker or brokerage firm you should consult an attorney with experience in securities law. The American Bar Association can help you find a securities attorney in your area.