Investor Protection and Fraud
10 articles
Who regulates what, how to check a firm or a person before sending money, the recognizable shapes fraud takes, and what recourse exists afterwards.
Foundations
Start here if the subject is new.Who Regulates What
Several bodies oversee different parts of the market, and knowing which one covers a firm determines both what rules apply and where a complaint goes.
Checking a Firm or an Individual
Registration status, employment history and disciplinary record are public and free. The check takes a few minutes and is the single highest-value habit in this subject.
The Recurring Warning Signs
Investment fraud is not endlessly creative. The same small set of features appears across cases separated by decades, which is what makes a checklist useful.
Ponzi Structures
A structure that pays existing participants from incoming money rather than from returns. It has a fixed arithmetic and a fixed ending, and both are visible from outside.
Affinity Fraud
Fraud that spreads through a community rather than through advertising. The shared affiliation does the work that due diligence would otherwise do.
Unsolicited Offers and Cold Approaches
An approach you did not initiate is a category with its own base rate. The forms change constantly and the structure underneath does not.
Elder Financial Exploitation
A category with its own rules, its own reporting channels and its own protective mechanisms, including the ability for a firm to place a temporary hold.
Intermediate
Assumes the foundations above.Pump and Dump Schemes
Promotion of a thinly traded security by holders who intend to sell into the demand they create. The structural features are visible before the promotion arrives.
Promotion and Disclosure Rules
Anyone paid to promote a security must disclose it. The rule is old, it applies on social platforms, and the disclosure is usually present and unread.
Complaints, Arbitration and Recourse
Most brokerage disputes go to arbitration rather than to court, because the account agreement said so. Knowing the process before it is needed changes what evidence exists.
Frequently Asked Questions
How can a broker or adviser be checked before sending money?
Through the regulators' free public databases. FINRA BrokerCheck and the SEC's Investment Adviser Public Disclosure site show whether a firm or person is registered, their employment history and any disciplinary actions. A firm or person that does not appear in either is a reason to stop and ask why.
Read the full article: Checking a Firm or an IndividualWhat is a pump and dump?
A pump and dump is a fraud in which promoters buy a thinly traded stock, push its price up with misleading promotion, and sell their shares to the buyers the promotion attracted. When the selling ends the price usually collapses. Small, illiquid stocks and paid promotion that is not disclosed are the common ingredients.
Read the full article: Pump and Dump SchemesWhat are the warning signs of investment fraud?
The same few signs recur: returns promised as guaranteed or unusually steady, pressure to act quickly, an unregistered seller or product, complexity offered in place of an explanation, and difficulty withdrawing money. Any one of them is reason to verify the firm with the regulators before going further.
Read the full article: The Recurring Warning Signs