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SEC Warning About Brokers: Is Your Financial Advisor Registered?

The SEC has issued an investor alert for people regarding fraudsters posing as brokers and investment advisors.  We’ve previously discussed brokers and investment advisors and their different schemes for defrauding clients—especially long-term clients. But as the SEC warns, there’s more to it than that, and a tactic you may not realize exists.  While you may have an established relationship with an investment professional, there are others who may attempt to convince you to terminate that relationship in favor of a new one. These individuals are frequently not registered brokers or investment advisors, but fraudsters. And that’s where the trouble starts. Many Ponzi schemes and other investment frauds use unregistered financial advisors to sell their securities. Sometimes, these advisors characterize themselves as senior wealth advisors or elder specialists to gain access to clients.    False Claims And Misrepresentation In The Sale of Securities  If you’ve ever received a friend request on social media from someone you are already connected to, you’ve experienced a “spoof.” This happens when someone creates an account pretending to be someone you already know. They steal a few pictures and facts so that people believe that the new account is the same friend. Also called “cloning,” you may not realize that the second account isn’t the same person until you begin conversing with them and realize something is wrong.The SEC has issued an investor alert for people regarding fraudsters posing as brokers and investment advisors.

We’ve previously discussed brokers and investment advisors and their different schemes for defrauding clients—especially long-term clients. But as the SEC warns, there’s more to it than that, and a tactic you may not realize exists.

While you may have an established relationship with an investment professional, there are others who may attempt to convince you to terminate that relationship in favor of a new one. These individuals are frequently not registered brokers or investment advisors, but fraudsters. And that’s where the trouble starts. Many Ponzi schemes and other investment frauds use unregistered financial advisors to sell their securities. Sometimes, these advisors characterize themselves as senior wealth advisors or elder specialists to gain access to clients.

False Claims And Misrepresentation In The Sale Of Securities

If you’ve ever received a friend request on social media from someone you are already connected to, you’ve experienced a “spoof.” This happens when someone creates an account pretending to be someone you already know. They steal a few pictures and facts so that people believe that the new account is the same friend. Also called “cloning,” you may not realize that the second account isn’t the same person until you begin conversing with them and realize something is wrong.

Fraudsters masquerade as investment advisors in the same fashion. Using both spoofed websites and profiles cloned from legitimate companies and investors, fraudsters present themselves as registered broker affiliated with a large company so that you’ll feel comfortable giving them your money.

For instance: if someone you didn’t contact approaches you about investing, check LinkedIn. Are there two (or more) profiles? There’s a good chance the newest one isn’t legitimate. Many set up websites with similar names to convince victims that they are affiliate with a registered broker, investment advisor or brokerage firm. A LinkedIn profile with experience, recommendations, and other information is likely the legitimate one. You’ll still need to investigate further, and attempt to contact them yourself.  Also, check FINRA’s website to confirm that your financial advisor is properly registered.

“Neighbor Spoofing”

Your phone rings, it’s a local number, close to yours, or possibly your own, and you answer it. Unfortunately, it’s not what you expected, and you hear something like:

“Your car’s extended warranty. . .”

“I’m with Microsoft calling about your PC.”

“This is XXX with Apple support. We’ve found some suspicious activity in your iCloud account.”

“This is the IRS/Social Security Administration. . .” (Mentions of “warrant for your arrest” are common with these fraudulent calls.)

“Can you hear me?” (Don’t say anything, just hang up.)

Investment fraudsters are also using these same tactics to convince you to hand over your money to them. This isn’t about investing—it’s fraud and it’s theft.

Workers in boiler rooms make calls to people about a “new investment.” They will claim to be employees of a legitimately registered firm, and represent that firm for the alleged new investments.

Most of these operations are based outside of the US, and use software that “spoofs” a telephone number so you’ll be more likely to answer. The number you see might be one close to yours or from a legitimate registered brokerage, but they are not calling from that company. Unfortunately, many people do answer and are fooled into believing what’s being told to them.

The best option is not to answer a call that you don’t recognize, even if it is a “nearby number.” The person on the other end is likely not someone you know. If it is, they’ll leave a voice mail.

Warning Signs

The axiom definitely applies here: if it sounds too good to be true, it generally is. Pay attention to “red flags” when it comes to your money, such as:

  • Anything unsolicited that offers returns on investment that are unrealistic
  • It’s a “unique” opportunity that’s “complicated”
  • “Guaranteed returns” is always a sign of fraud. There is no such thing.
  • Anyone who requests payment with a credit card or cryptocurrency. Licensed brokerages do not allow clients to invest with a credit card, nor do they require cryptocurrencies or digital asset wallets for investments.
  • If someone asks you for a wire transfer or a check, they may ask you to make the check out to an individual or a different firm. Their address may not be correct, or not the same one on the purported company’s website. They may also mention that the funds are for something unrelated to the alleged “investment.”
  • Make suggestions such as cashing in or taking out a loan against your 401(k) to fund this “new investment.” This isn’t common sense, and you can lose considerably.

This article discusses additional warning signs you should be aware of when it comes to your money and new investments.

Protect Yourself

Anytime someone wants to show you a “new investment opportunity,” especially one you didn’t ask for, you have the right to be skeptical.

The SEC recommends always verifying the identity of the other individual beyond the website and contact information they provide. Use FINRA’s free tool BrokerCheck, use Investor.gov (also free), your state’s securities regulator, and other means of research to verify someone’s identity. Find the actual company’s website, and call them to ask for that person.

If you are not able to adequately identify someone’s legitimacy, or suspect that they are making misleading claims of SEC registration, the SEC warns not to share any personal information, and do not wire or transfer any money to them. If you transfer money out of the US into something fraudulent, the SEC warns, you will likely never get that money back.

You can report potential securities fraud to the SEC at www.sec.gov/tcr. Online fraud should be reported to the FBI’s Internet Crime Complaint Center at https://www.ic3.gov.

Is Your Broker Legitimate And Registered?

Silver Law Group represents investors in securities and investment fraud cases. Our lawyers are admitted to practice in New York and Florida and represent investors nationwide to help recover investment losses due to stockbroker misconduct. If you have any questions about how your account has been handled, call to speak with an experienced securities attorney. Most cases are handled on a contingent fee basis, meaning that you won’t owe us until we recover your money for you. Contact us today at (800) 975-4345 and let us know how we can help.

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