Investor Alert: When Being a “Stalker” Is a Good Thing

By Brook Ptacek, Fall 2018 IAC Student Intern

Money attracts people from all walks of life and some of those people may not always have the best intentions. So, it is important as an investor to know who you are entrusting your money to. This seems like simple advice, but, surprisingly, very few investors actually take the time to learn about the person handling their money.

Let me demonstrate: As an investor, you would not just hand your money to someone you met on the street and tell them to get a return for you? Of course not! But what if that person was wearing a suit? And, instead of meeting them on the street, let’s say you met them in an office. What has changed? Besides that person’s clothes and the location where you met them, what knowledge do you have about that investment professional’s background? Nothing!

This lack of knowing your investment adviser or broker-dealer (i.e. the person/company trying to buy or sell securities to you or for you or for itself) is a problem many investors face but one the SEC is working to combat. In a recent investor alert, the SEC warned investors “to check the background of anyone selling or offering them an investment.” Now you are thinking, background check? How do I do that?

Well, the internet has made acquiring knowledge about people easy! So dig deep, find that inner sleuth, and let me tell you how you can start cyber-stalking the heck out of your investment adviser, brokerage firm, or individual broker.

An investor can easily check the background of his or her investment professional for free by going to Investor.gov.  On Investor.gov, an investor can use the search tools to find out if their investment adviser is even registered or licensed to handle their money.  You can learn about any history of customer complaints or past lawsuits or arbitration claims brought by customers. You can also look at any criminal or civil actions that have been brought. For quick answers on sites to conduct searches on, you can also look at the SEC’s Fast Answers.

For example, one common search tool that is recommended to investors to use is FINRA’s BrokerCheck, which allows investors to search a broker-dealer’s registration. All an investor has to do is click the above link or go to www.brokercheck.finra.org and enter the name of the financial professional or the firm that they are investing with (to search a firm, click the “firm” tab that appears on the search page). BrokerCheck then gives you a “snapshot” of a broker’s employment history, regulatory actions, and investment-related licensing information, arbitrations and complaints.” It’s a spectacular resource that gets investors the information they need on their advisers.

This seems like a basic rule of thumb but it’s a biggie: you have to know who is investing your money. So be proactive and get your cyber-stalking on.

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