Is Your Broker A Crook?

If your money is lost and your financial adviser is missing, here's what you can do to recoup your investment

fined for investor wrongdoing. To check CRD records, contact the NASD’s consumer hotline at 800-289-9999, or visit the regulatory arm of the NASD online at and use NASD’s “Broker Check” system.

Moreover, anyone identifying himself as an investment adviser or as someone who sells securities must be licensed and registered to do so — no matter how small or large the firm. Companies with less than $25 million in assets under management must register with the state. Firms with more than $25 million in assets must register at the federal level with the SEC. So any legitimate securities salesperson or investment adviser is going to be registered somewhere.

“If you find out that they’re not registered, or if they’re hesitant to give you their CRD or investment adviser number, that should set off alarm bells,” says Bob Webster, a spokesperson for NASAA. “One simple phone call really can save people a whole lot of time, grief, and money.”

A Word To The Wise
It can sometimes be hard to know whether you’re choosing the right investment professional. The CFA Institute (www.cfainsti has two helpful online documents that offer solid guidance: “Choosing a Financial Advisor,” and “Managing the Relationship Between You & Your Advisor.”

When it comes to selecting a financial adviser, experts say African Americans may be at particular risk, especially for “affinity fraud.” Affinity fraud involves con artists preying on people who belong to a group or association based on a shared cultural heritage, religious beliefs, or professional and social interests.

Other common scams that investors should be aware of include: advance fee rip-offs (commonly known as Nigerian money scams), pyramid frauds, and Internet investment swindles. In addition, NASD officials encourage investors to follow three basic rules: understand what you’re buying and with whom you’re dealing; invest based only on education and information — not on emotion; and, says Elisse Walter, senior executive vice president for regulatory policy and programs at NASD, “Remember, if it sounds too good to be true, it is too good to be true.”

Many investors, however, shy away from asking potential advisers detailed questions, which is a big mistake. “The relationship between a client and an investment manager is very much built on trust,” says Jon Stokes, senior policy analyst at the CFA Centre for Financial Market Integrity. “You’re turning over all kinds of personal information,” Stokes adds, so if an adviser won’t reciprocate “then that’s a big red flag.”

According to NASAA’s Investors’ Bill of Rights, you have the right to ask for and receive information from a firm about the work history and background of the person handling your account, as well as information about the firm itself. If something goes awry, you also have the right to discuss account problems with the branch manager or compliance department of the firm and receive prompt attention to, and fair consideration of, your concerns.

Should you find yourself a victim of unethical practices or shady dealings, immediately contact authorities at the SEC and officials at the NASD to get an investigation going.

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