What Kind of Fraud Can a Broker Get Involved In?

What fraudulent activity can a broker be involved in and how much should you consider the reputation? What are the warning signs to look out for?

There are 11 acts that are considered to be very damaging to stock broker’s career and image.

1) Brokers are not allowed to give out any misleading information. A broker can support his/her own self-interest by supplying false information. A broker can sabotage a client’s bottom line by padding his bottom line.

2) Anytime a broker persuades a client’s interest or ability to make an informed choices by omitting certain information, this is considered fraud.

3) Trading without a client’s consent.

4) Brokers who are not properly licensed are committing fraud.

5) Any form of breach through a contract is considered fraudulent.

6) Any sort of purchase that is not in line with the signed contract or not in line with a client’s best interests.

7) Margin accounts not being used in the right way is a form of abuse.

8) Over-concentrating a client’s portfolio is considered fraudulent.

9) Broker’s who do not uphold the financial responsibility they are assigned to are committing fraud.

10) A client’s portfolio that is not properly maintained is considered negligent behavior. Broker’s make money off of their client’s investments. Brokers should not be taking advantage of this. They should be getting a fair fee for their services, not robbing their clients blind.

11) A broker’s firm who is not taking proper care of their clients and not looking after their brokers are held accountable. This is considered to be fraud in both a direct and indirect way. A broker’s firm is responsible for their staff’s behavior. Not disclosing pertinent information that is known at the time is also considered to be fraudulent.

Is a Broker’s Reputation That Big of a Deal?

Yes, it is. Clients need to know who they are getting involved with. Pay attention to any warning signs that come to light. A client is just as responsible as the broker. It is the client’s responsibility to recognize when bad behavior is happening.

What Are the Warning Signs?

1) Is your broker avoiding your phone calls and emails right now. They may have been diligent about this in the beginning, but now they are avoiding you. This is sign number one. There may be a good reason for this. The first time is happenstance. The second time is a coincidence. The third time is a sign that something is wrong. Do not let it get to the third time.

2) Brokers who only converse with a client through a phone call is a bad sign. They will give their clients lots of excuses. It is a scam. Tell them their services are not needed anymore and walk away. Trust me, they will not care. They will shrug it off and move on.

3) Has the company demanded any verification paperwork before they get to work? This is a clear sign that something is wrong. Walk away now. They are looking to scam you.

4) The broker may cause technical glitches online when it is time to payout. They are doing this to avoid paying you. They will make excuses for it, saying they are not responsible. They are. Once it happens the first time, do not offer them a second chance. They will move on to someone else.

5) Are there strong customer reviews written by other clients facing the same thing? Pay attention to these reviews. They will tell you everything you need to know. When someone else is telling you to stay away, there is usually a good reason why.

6) Those who are struggling to withdraw their funds need to be looking for someone new. This is a scam.

Why Do They Get Away With It?

There are two main reasons for this.

1) There are not enough regulations preventing them from doing this.

2) The client is letting them get away with it. This happens a lot with the newbie investors. They are inclined to give these brokers the benefit of the doubt. Do not make this mistake. Brokers get away with it by covering their butts in the legal agreements. Read over everything.

Everything you do will come back in time to you.

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