by Chris | Recently, residents of Gainesville and St. Augustine were victims of investment fraud. While neither of these incidents was of the scale and complexity of the Madoff case, with a little homework and some healthy skepticism, they may have been avoided.
How do you protect yourself from investment fraud?
I recommend that you visit www.saveandinvest.org this website contains valuable information for the investor. Choosing a reputable financial advisor may also help you avoid being a victim.
A good start is to ask your CPA and attorney for a referral of a financial advisor, then visit www.brokercheck.finra.org to check the broker's professional background. This website will let you know what licenses, work history and most importantly whether or not there are customer disputes that have been disclosed.
If you see a YES next to “are their events disclosed about this broker,” you need to click on "Get Detailed Report." If you see a termination or customer complaints, do not hesitate to ask for an explanation from your financial-advisor candidate (IF you still decide to interview that person).
There are lessons to be learned from both the St. Augustine fraud and the Gainesville fraud.
In The St. Augustine fraud, investors were sold unregistered securities that paid a significantly higher interest rate than the marketplace. An unregistered security is one that is not registered with the Securities and Exchange Commission. That does not automatically mean it is a fraudulent investment, but it usually indicates that the amount of information available is limited. Anytime someone is offering you an investment that pays a significantly higher rate of return than the marketplace, you need to investigate further and get a second opinion. In this particular situation, investors could not access their accounts through the internet and “account statements” started to arrive infrequently. These are potentially red flags too.
The Gainesville fraud revolved around an advisor who had the ability to withdraw money from client accounts. While I do not know the exact details of the case, your advisor should never withdraw money from your account without your written permission and can never commingle it with his funds. If the clients had internet access and reviewed their investment account statements, they may have noticed that funds were being withdrawn. If you have concerns, look in the history or activity summary of your statement and look for words like “check paid”, “funds transferred”, “security transferred” or “withdrawal”.
If you have any concerns you should ask your CPA to review your account statement with you.
Christopher J. Conner CFP
North Florida Wealth Advisors
Securities offered through JW Cole Financial Inc. member FINRA/SIPC
Advisory services offered though Jonathan Roberts Advisory Group, Inc