Protect Your Money from Unscrupulous Brokers

Watch out for Unwise or Unscrupulous Brokers

A high pressure sales pitch can mean trouble. Be suspicious of anyone who tells you, "Invest quickly or you will miss out on a once in a lifetime opportunity."


    * Never send money to purchase an investment based simply on a telephone sales pitch.

    * Never make a check out to a sales representative personally.
    * Never send checks to an address different from the business address of the brokerage firm or a designated address listed in the prospectus.

If your sales representative asks you to do any of these things, contact the branch manager or compliance officer of the brokerage firm.

Never allow your transaction confirmations and account statements to be delivered or mailed to your sales representative as a substitute for receiving them yourself. These documents are your official record of the date, time, amount, and price of each security purchased or sold. When you receive them you should verify that the information in these statements is correct.

Certain activities may indicate problems in the handling of your account and, possibly, violations of state and federal securities laws.

Signs to Avoid when Choosing a Broker

Be alert for:

   1. Recommendations from a sales representative based on "inside" or "confidential information," an "upcoming favorable research report," a "prospective merger or acquisition," or the announcement of a "dynamic new product."
   2. Representations of spectacular profit, such as, "Your money will double in six months." Remember, if it sounds too good to be true, it probably is!
   3. "Guarantees" that you will not lose money on a particular securities transaction, or agreements by a sales representative to share in any losses in your account.
   4. An excessive number of transactions in your account. Such activity generates additional commissions for your sales representative, but may provide no better investment opportunities for you.
   5. A recommendation from your sales representative that you make a dramatic change in your investment strategy, such as moving from low risk investments to speculative securities, or concentrating your investments exclusively in a single product.
   6. Switching your investment in a mutual fund to a different fund with the same or similar investment objectives. Unless there is a legitimate investment purpose, a switch recommended by your sales representative may simply be an attempt to generate additional commissions for the sales representative.
   7. Pressure to trade the account in a manner that is inconsistent with your investment goals and the risk you want or can afford to take.
   8. Assurances from your sales representative that an error in your account is due solely to computer or clerical error. Insist that the branch manager or compliance officer promptly send you a written explanation. Verify that the problem has been corrected on your next account statement.