7 Telltale Signs of Broker Fraud

How do I know if my stockbroker has defrauded me?

Stockbrokers and financial advisors have a legal duty to put your financial well-being before their own when they make decisions about your investments. However, some financial professionals aren’t willing to wait until you make money to increase their profits.

According to the Federal Trade Commission, 30.2 million people are defrauded each year for losses that total close to $3 billion. While a significant amount of this is the result of broker fraud, surveys indicate that only 20 to 50 percent of fraud is ever reported.

Fraudulent brokers often succeed at committing serious acts of broker fraud, and there are a variety of illegal and unethical ways in which they may be manipulating your investments for their personal gain.

If you think you might be a victim of broker fraud, you should contact an experienced securities arbitration attorney immediately. Though there are many ways for brokers to profit at your expense, here are a few major ones to watch out for:

1. Late Execution/Refusing Orders

Has your broker or financial advisor been executing your orders to buy and sell investments on time? Have there been strange delays in your orders or has your broker ever refused to buy or sell a security after you’ve asked them to do so? By law, brokers are required to follow your instructions when it comes to buying and selling your investments. It’s your money, and if your broker isn’t following your orders, they’re doing something seriously illegal.

2. Guaranteed Profits

Has your broker ever promised that you would make a specific amount of money on an investment over a specific period of time? If so, you may be a victim of broker fraud. All investment markets naturally fluctuate over time, so it’s impossible—and illegal—for any financial professional to guarantee investment results.

3. Illegal Accounts

Has your broker ever asked you to open an account under a different name, address, or social security number? Have they asked you to transfer money to accounts not affiliated with your brokerage firm or pressured you to fill out forms with your bank account number that you didn’t understand? If so, they may be using your money to open illegal accounts.

These accounts could be involved with illegal activities such as insider trading, financial fraud, or other crimes, or the broker could simply be siphoning your money away into their own bank account. Either way, you should never be asked or pressured to transfer money into any account other than your official brokerage account. If you are, it’s a telltale sign of broker fraud.

4. Misrepresentation or Omission

Have you lost money on an investment that you didn’t really understand? Has your broker pressured you into complex investments that you later lost money on? Has your broker made certain claims about the nature or type of investments you bought that later turned out to be untrue? According to FINRA, brokers are required to accurately represent all investments they recommend to clients, so if you’ve been misled, your broker may be guilty of a serious violation.

5. Over-concentration

Has your broker concentrated all of your investments into an extremely narrow and/or highly risky investment type, such as commodities, shorts, or futures? Did you lose money as a result of this lack of portfolio diversification? If so, your broker may be attempting to profit at your expense. They may be receiving bribes, kickbacks, or other financial compensation for investing in certain sectors which may or may not be beneficial to your financial goals.

Remember, legitimate brokers and advisors accept the fact that the only way their commissions will grow is if your portfolio does as well. However, the financial professionals you work with may not have your best interests at heart. In 2010 alone, the US government’s Fraud Enforcement Task Force discovered approximately 8 billion dollars in financial and investment fraud.

With broker fraud more common than ever, especially among the retirement community, it’s never been more important to be on alert for suspicious behavior. If you think you’ve been defrauded by your broker, contact the Silver Law Group for a complimentary consultation to discuss your options for loss recovery.