The SEC’s Office of Investor Education and Advocacy (OIEA) and Retail Strategy Task Force are warning investors about red flags that a broker may be running a side business offering investments that are not approved for sale through the broker’s firm.
Always check the registration status and background of anyone recommending or selling an investment using the free simple search tool on Investor.gov. It’s a great first step toward protecting your money, as unregistered persons commit much of the investment fraud in the United States.
Even if you are investing with a registered broker that you have known for years, make sure that your investments are approved for sale through the broker’s firm. Ask your broker for an explanation and follow up with the firm’s compliance department if you encounter any of these potential red flags:
- Your broker asks you to make out a check, or to wire money, to any person or to a different firm;
- Your broker tries to sell you an investment without any paperwork about the investment;
- Investments or deposits you made through your broker do not appear on your account statement from the firm; or
- You receive an account statement that does not appear to be from the firm.
Use caution if your broker asks you to sign a letter that you consent to an investment that is not purchased through the firm. If you believe a broker is offering investments that may not be approved for sale through the firm, or to report other problems with a broker, submit a complaint to the firm and to the SEC or FINRA. Anytime you invest through a broker, confirm that the broker is registered and look out for signs that may indicate your investments are not being made through the broker’s firm.
Visit Investor.gov, the SEC’s website for individual investors.
The Office of Investor Education and Advocacy has provided this information as a service to investors. It is neither a legal interpretation nor a statement of SEC policy. If you have questions concerning the meaning or application of a particular law or rule, please consult with an attorney who specializes in securities law.