5 ways to make sure your stock broker is legitimate
Credit: Pixabay
The unfortunate reality is that not every stock broker will put your interests and your money’s interests first. Some stock brokers are in it for number one, which can mean you’re at risk for significant losses that may otherwise have been kept to a minimum. When you’re considering investing in stocks with the help of a broker, it can be worth doing the following things for peace of mind.
Knowing common misconduct types to look out for
It can be challenging to identify brokerage fraud if you are unsure what it actually looks like. Untrustworthy brokers can do a number of things with your money that is either fraudulent or simply unethical. Some of these things can include trading without your permission, lying or withholding information, taking part in excessive trading, and not following your instructions. The more you know about broker misconduct, the more likely you may be able to spot it if it’s happening to you.
Steer clear of cold caller brokers
If you’ve ever taken a phone call or received an email or letter from a stock brokerage you’ve never had dealings with, be on guard. They may be making all the promises under the sun about how you could be making money or even offer you freebies that look like they have no strings attached.
As authentic as they may seem and as enticing as their offerings, it’s worth questioning their legitimacy. After all, they managed to get your contact information without your permission.
Do your homework
When you sign up with a stock broker, you expect them to manage your money better than you can yourself. However, if you have a gut feeling that’s not happening, trust it.
A simple Google search of the brokerage or broker you’re dealing with can be all it takes to reveal previous dealings and any problems. You can also dig much deeper by running a FINRA broker check. This search tool provides insight into whether people or firms are registered while also offering information on their history, any complaints, regulatory actions, and more.
Read your statements
Go through your investment return statements with a fine-tooth comb. It’s easy to put your trust in experts and think they are doing right by you, but that’s not always the case. Look out for any portfolio changes you didn’t authorize, and even question some returns that aren’t what you anticipated.
Trust yourself
If you see even one red flag that could indicate brokerage fraud, don’t delay taking action. Your first action could be withdrawing your funds to limit any further damage. Once you’ve taken a closer look at what has been happening and believe your concerns are valid, consider making a complaint to the U.S. Securities and Exchange Commission. A broker misconduct attorney can assist with information gathering in this process to obtain all the information you need.
There are more legitimate stock brokers than dishonest ones, but that doesn’t mean the odds are in your favor. Be aware of common misconduct types, research your chosen broker, and don’t be afraid to raise the alarm if you notice anything unusual about your transactions.
