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How to Protect Yourself from Securities Fraud

Simms Law, P.C. June 14, 2022

If you’re an investor, you place a lot of trust in your financial advisor. After all, as a fiduciary, your financial advisor is supposed to act in your best interests. Unfortunately, however, things don’t always work out this way. Financial advisors sometimes take advantage of the great trust their clients put in them—defrauding them out of their hard-earned money and putting their futures at risk. Luckily, as discussed below, there are a number of ways that investors can reduce their chances of becoming victims of securities fraud. 

How To Protect Yourself From Securities Fraud

Monitor your investments. Yes, you pay your financial advisor to handle your investments. However, this doesn’t mean you shouldn’t be involved. Therefore, you should periodically check in with your financial advisor on the status of your investments. The more involved you remain, the less likely you are to become a victim of fraud. 

Check a company’s history before you invest in it. Don’t invest in any company that has little or no published information or no operating history. Investments in these types of companies are more likely to be fraudulent than investments in established companies. 

Only work with a financial advisor who takes the time to explain things to you. You and your financial advisor are a team. Therefore, your financial advisor should treat you like a teammate by taking the time to explain your investments to you. The less willing a financial advisor is to discuss your investments with you, the more suspicious you should be that something fraudulent may be going on. 

Never make a check payable directly to your financial advisor. Any time you make a check payable directly to your financial advisor, you take a big risk. In fact, if your advisor asks you to do this, you should immediately report it to his or her firm.

Check credentials. Before working with a broker and firm, make sure both are licensed in your state and listed with the Financial Industry Regulatory Authority and the Securities and Exchange Commission. Working with an unlicensed financial advisor practically guarantees fraud. 

Don’t allow anyone to pressure or rush you into an investment. Finally, if your financial advisor attempts to pressure or rush you into an investment, this is a sign that something is amiss. Always do your due diligence prior to making an investment. 

Contact An Investor Representation Attorney 

If you suspect your financial advisor of fraud, you should contact an experienced investor representation attorney as soon as possible. At Simms Law, P.A., we represent the victims of fraud in actions against financial advisors and other investment professionals. Whether you are a victim of financial fraud or you feel that your financial advisor or broker failed to take your best interests into account when acting as your fiduciary, we can help you obtain the compensation you deserve. Please contact us today for a free evaluation of your case.