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How Do I Verify if a Broker Is Trustworthy?

If you are going to invest your money, you want to be sure that the broker, brokerage firm, or financial advisor you are considering is legitimate. This means doing some homework. Not only is there an abundance of scammers in the world, but many stockbrokers employ less than savory practices.

If you lost money due to the wrongdoing of a  stockbroker or financial advisor, you deserve justice.  The stockbroker fraud lawyers at Colling Gilbert Wright & Carter have extensive experience holding wrongdoers accountable and helping fraud victims recover their losses.

Before committing to a stockbroker or firm, do your due diligence. Ensure your broker is trustworthy by considering the steps below.

1. Check with Professional Organizations

A simple web search is a great place to start when looking into a prospective broker. Start by just searching the broker and firm name. This type of general search may reveal media reports of disciplinary actions or alleged wrongdoing.

Once you’ve conducted a general search, consider searching some regulatory agencies directly. A financial professional – and the firm he or she works for – is legally required to be registered with both state and federal securities regulators. This means that information related to a broker’s registration and possible disciplinary actions is available to the public.

Although some information may overlap, it’s worth checking multiple agencies. Individual agencies may have different policies regarding the information they can share and how long the information is available. Consider checking with the following agencies:

  • SEC: The SEC’s Investment Advisor Public Disclosure (IAPD) website is a key source of information about registered financial advisors. The site provides registration and other information that most brokers and brokerage firms must file. You can learn about a broker or firm’s fee schedule, conflicts of interest, disciplinary information, services, and background.
  • FINRA: The BrokerCheck website, operated by Financial Industry Regulatory Authority (FINRA), is a good resource for finding information about brokers and their firms. FINRA is a private organization authorized by the US government that enforces ethical investment practices among registered brokers.
  • State securities regulators: Your state’s regulators may offer information on a broker or firm’s licensing, registration, and disciplinary actions.

2. Check the Prospective Broker’s Website

Although an illegitimate broker may or may not have a website, a regulated broker will always have one that provides contact information and regulatory information. Websites of legitimate brokers are user-friendly and provide all the required details.

Fake brokers often try to impersonate existing legitimate brokers by using similar-looking names, FSP numbers, and fake addresses. So, look for any misspellings in the name of the website and verify any prospective broker with the professional agencies listed above, regardless of whether they have a website or not.

3. Research Online Reviews

You may be able to find information about the broker through online reviews. To do this, simply search the name of the broker or firm and see if any reviews are available.

You may reviews that speak favorably of the broker or firm, or you may discover reviews that paint your prospective broker or firm in an unfavorable light. Either way, you may have the opportunity to learn more about how the broker operates and what you can expect from his or her service.

4. Have a Conversation with the Prospective Broker 

When choosing someone to invest your money, it’s important to feel comfortable with the person who will provide you with financial advice. Have a discussion with your prospective broker and ask questions about his or her services and experience with clients who have similar needs to your own. Also ask about the broker’s rate, fee, and commission.

If the broker seems rushed, unclear, or otherwise unwilling to give you complete and candid information, look elsewhere.

5. Check References

Checking references is an essential step in selecting a legitimate broker. Ask the broker for personal references and call the references to understand what you can expect from the broker’s services and performance. 

You could also begin your search for a broker by asking your friends and relatives for their personal recommendations. You are more likely to find a reputable broker or financial advisor if someone you trust has already had positive experiences with that person.

6. Be Wary of Cold Contacts 

Whether in the form of a letter, email, or phone call, be cautious of any unsolicited contact you receive from a broker or investment advisor with whom you’ve never done business. Beware of investment seminar invitations using gifts or free lunches. Be particularly cautious with callers who offer once-in-a-lifetime opportunities, use high-pressure sales tactics, or refuse to provide written information about an investment.

Call Our Stockbroker Fraud Lawyer Today

If you believe that you are the victim of securities fraud, contact the stockbroker fraud lawyers at Colling Gilbert Wright & Carter today.

Contact our office online or at (800) 766-1000 for a free consultation. We can help you pursue the justice you deserve.