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Securities and Commodities Arbitration and Litigation
J. Pat SadlerEric Hovdesven
12 Ways to Protect Yourself Against Investment Fraud
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Table of Contents

  1. Stick with a name you know or a trusted professional.

  2. Check into the backgrounds of the broker and brokerage firm.

  3. Beware of the broker who tells you that he only makes money when you make money.

  4. Be wary of a broker who wants to liquidate your blue chip holdings or steers clear of blue chip stocks in order to invest in lesser-known securities.

  5. Never do business with a broker who offers to sell you a position in a hot initial public offering (IPO) but only on condition that you agree to purchase shares in aftermarket trading.

  6. Do not allow your broker to hold you in a stock when you want to sell.

  7. Hang up on any broker who wants you to buy or sell a security based on inside or private information.

  8. Do not overstate your income, net worth and objectives and ask for a copy of your new account information form.

  9. It is very easy to lose money on small-cap or bulletin board stocks.

  10. Be wary of the brokerage firm manager who promises special treatment to make up for losses you have suffered at the hands of one of the firm's brokers.

  11. Put it in writing, keep notes and act promptly.

  12. Write checks only to the brokerage firm.

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12 Ways to Protect Yourself From Investment Fraud
 
Be wary of the brokerage firm manager who promises special treatment to make up for losses you have suffered at the hands of one of the firm's brokers.

Frequently, our clients who are victimized by unscrupulous brokers are further victimized by the benevolent "manager." We place the word in quotes because the person may not be a manager at all. Dishonest brokers often work in pairs, and when one has lost the customer's trust and confidence, the other comes in to further squeeze the customer financially. The "manager" will be sympathetic to the customer's plight, often agreeing that the first broker was young and perhaps too aggressive.

The customer will be told that the manager will make back the customer's losses by allocating to the customer the special opportunities that the firm saves for its best clients. The customer must only agree to send in some more money so that the "manager" will have something to "work with." Don't fall for this scam. If you send additional money, it will likely disappear in the same manner as the money you have already invested.

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