How to Tell if You're the Victim of Brokerage Fraud

How to tell if a Broker is lying, if his/her mouth is moving and your account is losing money.

Dear Bruce the financial manager, I would love to give you my money, but I just recieved an email from some nice guy in NIGERIA who told me I am the sole heir to millions of dollars. So I guess with this new found wealth I will not need your help. Thanks anyway.

Dear Bruce the financial manager, I would love to give you my money, but I just recieved an email from some nice guy in NIGERIA who told me I am the sole heir to millions of dollars. So I guess with this new found wealth I will not need your help. Thanks anyway.

Hey Edward - I got the same email. You must be my brother!!!!

If it sounds too good to be true it is. If your broker can't explain the 'risk' of the investment in plain simple terms, he or she doesn't know the risk, and you should look elsewhere. For 99+% of investors, mutual funds, no-load, no fees, ETF's, direct from the vendor (Vanguard my favorite), produce the least amount of 'human' caused risk - i.e. stupid risky products that aren't understood by anyone except the rich wizards at goldman and the other hooligans whose only goal is to create fat profits for themselves to cover their rich lavish lifestyle. Never invest with the big 7 firms - goldman, merrill, et all (at least those that are still around in some form.). They have the old school philosophy - big fat commissions, huge bonuses for twentysomethings who have no clue what they are doing, they are just going with the flow. (read new york times cover article on this today.) $5m bonus for 'managing mortgage trading' was paid to one twenty something, and know you are paying for the carnage this 'boy' created. This game is over. If you want a decent blog to review, check out bluejeansmillionaire.com, which has daily articles on how the 'little' guy can invest safely and wisely and make money without having to suck up to the big 7.

The law firm quoted is not correct. While Financial Advisors (Series 65) DO have a fiduciary responsibility to act in their clients' best interests, brokers, by definition, DO NOT. Yes, by NASD Rule 205 they must "Know Their Customers" so that the securities they recommend for them are "Suitable". But, as employees of a Broker/Dealer, they cannot call themselves the client's fiduciary. Indeed, most major brokerages prohibit the use of the term "Fiduciary" by any of their retail registered representatives. Nor is the average Broker allowed to have "Discretion" over client assets. Each brokerage transaction must be approved by the client (down to time, price, and amount), unless the assets are turned over to a sub-manager with discretion. The use of the term fiduciary by the law firm is no doubt intended to allow a wider net to be cast for the inevitable storm of nonproductive litigation they are positioning themselves for and salivating over.

dudetube, you are mistaking traders and analysts for financial advisors. there aren't many financial advisors that make $5 million+ in a year. not on the retail (consumer) side. the big money has always been on the institutional and corporate side.

I have been investing for over 30 years into a changing market. The market actually does nothing but go up and go down. All the brokers I have used over the years made more money than I have. I have paid out more in annual, monthly, and service fees, and taxes yearly than I have made. I finally wised up and started investing in money market, cd's, and other secured investments and over the long haul made money that remained secure. Granted it did not have much of a return and seemed very disappointing at times when the market would go up and I would be left behind. But my point is proven now, I still have what I saved. I also found that the brokers don't know anything about what they are supposed to know. Follow the money trail.

My Dear Estermonus, Please do not confuse my rebuttal as being argumentitive, but, don't confuse a broker with a Financial Advisor. Have you ever heard of the "Merrill Rule"? Merrill's brokers were calling themselves "Advisors" and portraying themselves as holding themselves to a higher standard, but, didn't have the Licenses. The facts are that every Broker/Dealer has a written compliance manual that interprets rule 205 and every other FINRA/SEC rule regarding RIAR's. 99% of RIAR's use non-discretionary accounts because of an even higher standard of fiduciary responsibility. The word fiduciary is used to describe the level of responsibility a RIAR has to their client. It goes way beyond knowing your client and their objectives. Although I chose a poor company to draw a comparison against, Merrill is the most fined Broker/Dealer in the history of the investment industry. I work in the back yard of Edward Jones and A.G.Edwards. I am an Independent Advisor that works within a bank and as a result of that specific relationship, I am governed by both the SEC/FINRA and the banking industry. That in itself holds me to a different standard than working with just a Broker/Dealer. Ultimately though, it comes down ot the integrity of the individual Advisor that you are thinking of working with. As an investor, never be afraid to walk away from an Advisor, or, a Broker and seek out another that you feel comfortable with. If you have to go through a dozen, or, more, then that is what you should do until you find the right one. Bruce

Negative returns on treasuries assure me we hit bottom! NO one is going to accept that return long :)

This site has become a haven for cheapstakes who want to advertise their services for free. If Yahoo does not step in to stop this, serious investors will no longer bother to go to Yahoo financials. But then they are one big advertising scam themselves. Their news sources are articles from Motley fool and Street.com, which are nothing more than ads for their own services. Then their is Seeking Alpha where every wannabe trader writes something in a real hurry and sends it in, so he can see his name "published".

mogleytheman - Thursday December 18, 2008 10:28AM EST desertrapunzel and how have you done this year with your due dilegence mogley- I have done ok thanks. I took a bad hit like everyone else and dropped 40%. I had dropped my "ADVISOR" in Q-2 as it was making me feel lousy to know I was paying him 10K a year and he was doing very little to earn it as my accounts were only growing about 6% a year for the previous 2 years. I have been working my accounts and now am only dow 20% from my all time high. I am retired and living off of my accounts and have a long time till SS kicks in. How about you mogley?

wow...there is good advice and not so good advice..because the wolf is in house...pretending to be a sheep...

TRICKLE-UP POVERTY?......if our local auto repair shops rip off people, what do you expect from this white collar pencil pushing trash......I've known all along that people cannot be trusted at face value, and that most folks are pretty much crooks, UNTIL we, in no uncertain terms, insist that they be good people......whether it be a broker, or the box boy at the grocery store (especially those with excessive tats, appalling piercings, baggy under-wear showing pants, or any number of other indicators that our better judgment tells us that something is not quite right).......clean-cut "normally" dressed fast talkers who are short with you, however, may be another red flag, it's really impossible to site all the situations, sure! all of us are busy busy, and have a right to self-expression, but our senses WILL signal a fear response of some kind, you should learn to identify those feelings, and act accordingly, just like an animal in the forest, a much closer examination of the situation may suffice for us humans however, but in SOME cases you may indeed have to "run like a deer", locks are to keep already honest people honest, and you may need to always keep your door locked. OH YES...you'll often be chastised for this behavior, often accused of being "paranoid", impatient, rude, etc etc, but that's just tough, people will just have to deal with it, but it CAN be done diplomatically if you practice, and learn to effectively use the accepted diplomatic "rules of the road". The cons always use our learned weaknesses and greed against us, we are taught to be weak and accommodating to keep the peace, OR.....keep our jobs maybe? sadly, we're born greedy......I think many of the MADE-OFF victims and others, became victims of their own greed, AND suffered from excessive "Visions of Grandeur".........as I said, most people are pretty much greedy crooks on the surface......deep down, people CAN be good, but it's all a very delicate mining operation.

elirugby06 - you are confused my friend. My point is the firms were the problem - they intertwined their brokers/analysts/dealers in one. One side would say 'sell' while the other side - in cahoots - was buying like crazy. Pump-n-dump, rosy analyst notes, all the schemes they've cooked up to bilk the public while they ALL raked in huge fees and bonuses at the investors expense. It's time these greedy FIRMS were put to rest - along with the detroit3. In my industry, you develop and sell BAD PRODUCTS and you quickly go out of business and You (I) lose your jobs. In these two bailout queen industries, you develop BAD PRODUCTS and you get BIG BONUSES and BIG PAYOUTS from us federally paying taxpayers to preserve your lavish lifestyles while you gear up for the next pump-n-dump financial scheme. More of these will be coming, you will be sure, and they will be 'over-marketed' with safety, security, as key buzzwords. Buyer Beware.

Bruce, it is unfortunate that you misunderstood my post. We are on the same side, you and I. I had meant to illustrate that Brokers do not assume fiduciary status toward their clients, while Advisors, under statute are fiduciaries. While it is ultimately the ethics of the individual that determine whether one always puts the clients' interests first, the comment made by the lawyer in the interview is fallacious. No one will convict a Broker of a breach of fiduciary duty to a client because no such duty exists. I left the brokerage business to also become an advisor, and I am much more comfortable with my current status as a real fiduciary to my clients than I was in my former role with all of its inherent conflicts-of-interest.