In order to help investors protect themselves from unscrupulous financial services practitioners, the SBR publishes guidance and information aimed at providing you – the investor – with the resources essential to avoiding issues in the constantly-changing investment world.
To help investors avoid future problems with their brokers, we have compiled a comprehensive list of items that the informed investor should make it their business to remain vigilant about:
- - Be sure to read, understand and retain the statements your broker sends to you each month or quarter. The same goes for trade confirmations and other information pertaining to your investment transactions.
- - It is imperative that you raise a query immediately if you identify a transaction or other entry that you do not understand, recognize or did not authorize. Should you query fail to secure a satisfactory response, consult the firm's branch manager or its compliance officer.
- - If you feel that you have sufficient grounds to make an allegation of improper business conduct or to seek monetary redress, you should make a written complaint to the management of your brokerage firm's sales office and, subsequently, directly to the firm's compliance department. Keep a copy of your correspondence and of all other related documentation or electronic communication with the broker/dealer. Should a satisfactory solution to the problem not be possible through the firm's internal procedures, alternatives like as mediation or arbitration may be more successful. Always bear in mind that a delay in pursuing your complaint for whatever reason may reduce its credibility.
- - Tenacity is a virtue; if you do not receive a satisfactory response to your complaint. If repeated attempts to secure a favorable outcome fail, the filing of a written complaint with the SBR or another self-regulatory organization may be warranted.
- Be suspicious of sales people who make exaggerated claims about the potential profitability of a particular investment, or who predict that "you will double your initial outlay in six months." This is particularly applicable if you are dealing with a broker with whom you have had no history. If it sounds too good to be true, it often is.
- - Be wary of any broker exerting pressure on you to commit to an investment quickly in order to avoid missing out on a "once in a generation opportunity." Any investment decision should be the culmination of adequate deliberation and thought.
- - Never pay money to a firm or a broker that you are hearing from for the first time on the strength of an unsolicited telephone call.
- - If you are investing for income and yield, be it in stocks, bonds, pooled investments, etc., be sure that you fully comprehend the nature of the security in which you are going to invest - there will typically be changeable market and price risks that characterize each type of security.
- - Be cognizant of the fact that investing in so-called "penny stocks" is intrinsically risky and should be undertaken only following a thorough investigation of both the company and of the liquidity of the market for its stocks.
- - Investing money is a major decision, comparable in significance to the purchase of a house or an automobile. You must thoroughly investigate any potential investment before you make it. Such investigations should be extended to both the broker and the securities firm making the recommendation.
At the bare minimum, you should request a prospectus, annual report and/or analytical information, and read them carefully. A pre-decision discussion with your broker, independent adviser or certified public accountant should cover the potential risks, rewards and consequences.
SBR's 'Broker Search' can help you determine whether your broker is currently registered with SBR and whether or not he or she has been the subject of:
- - Consumer-instigated pending mediations or civil proceedings pertaining to investment activity;
- - Written customer grievances alleging sales malpractice and compensatory damages of the equivalent of $5,000 or more;
- - Settlements of $15,000 or more arising from mediations, civil suits and customer complaints pertaining to investment-related activity;
- - Consumer-instigated arbitrations or civil proceedings that culminated in an award, regardless of the amount, to the customer;
- - Written customer complaints alleging forgery, theft, misappropriation or conversion of bonds or securities; or,
- - Any final sanction (including a bar, suspension or fine imposed by SBR, the Securities and Exchange Bureau or other federal or state regulatory agency).
